Question

Henderson Supermarkets (HS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows:
Ordering ...............$ 102 per purchase order
Delivery and receipt of merchandise .... $ 78 per delivery
Shelf- stocking ............$ 21 per hour
Customer support and assistance .....$ 0.22 per item sold
The revenues, cost of goods sold, store support costs, activities that account for the store support costs, and activity- area usage of the three product lines are as follows:


Under its simple costing system, HS allocated support costs to products at the rate of 30% of cost of goods sold.

Required
1. Use the simple costing system to prepare a product- line profitability report for HS.
2. Use the ABC system to prepare a product- line profitability report for HS.
3. What new insights does the ABC system in requirement 2 provide to HSmanagers?


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  • CreatedMay 14, 2014
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