Fresh Daily convenience store based in Camberwell specialises in selling organic products. Fresh Daily convenience store prepares
Question:
Fresh Daily convenience store based in Camberwell specialises in selling organic products. Fresh Daily convenience store prepares and bottles the juices in store from the fresh organic produce it sources. Alongside selling to retail customers walking into the store, Fresh Daily convenience stores also accepts and delivers bulk grocery orders to speciality restaurants around Melbourne. Jeff Musk, owner of the convenience store seeks your help in generating insights about the profitability of individual product lines: Juices, Fresh produce, and Packaged food. Jeff provides you the following data generated from his management information system for the last 12 months
Fresh Daily convenience store currently allocates support cost (all cost other than cost of goods sold) to product lines at 25% of the cost of goods sold of each product line.
Required
(a) Calculate the operating profit and operating profit as a percentage of sales revenue for each product line using the supermarket's existing costing system.
(b) If Fresh Daily convenience store allocated support costs to product lines using activitybased costing system, what would be the operating profit and operating profit as a percentage of sales revenue for each product line.
(c) Provide 3 key insights to Jeff Musk by comparing and analysing your answers to requirements (a) and (b) above
Managerial Decision Modeling with Spreadsheets
ISBN: 978-0136115830
3rd edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair