Fitzgerald Supermarkets (FS) 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 ..........................................$95 per purchase order Delivery and receipt of merchandise .........$76 per delivery Shelf-stocking ...................................$19 per hour Customer support and assistance .............$ 0.15 per

Chapter 5, Questions #27

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Fitzgerald Supermarkets (FS) 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 ..........................................$95 per purchase order

Delivery and receipt of merchandise .........$76 per delivery

Shelf-stocking ...................................$19 per hour

Customer support and assistance .............$ 0.15 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:

Fitzgerald Supermarkets (FS) operates at capacity and decides to apply

Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold.
1. Use the simple costing system to prepare a product-line profitability report for FS.
2. Use the ABC system to prepare a product-line profitability report for FS.
3. What new insights does the ABC system in requirement 2 provide to FS managers?

Related Book For answer-question

Horngrens Cost Accounting A Managerial Emphasis

16th edition

Authors: Srikant M. Datar, Madhav V. Rajan

ISBN: 978-0134475585