Family Supermarkets (FS) has decided to increase the size of its Memphis store. It wants information about the profitability of individual product lines: soft drinks, fresh produce, and packaged food. FS provides the following data for 2017 for each product line:

FS also provides the following information for 2017:

Required

a. Family Supermarkets currently allocates store support costs (all costs other than cost of goods sold) to product lines on the basis of cost of goods sold of each product line. Calculate the operating income and operating income as a percentage of revenues for each product line.

b. If Family Supermarkets allocates store support costs (all costs other than cost of goods sold) to product lines using an ABC system, calculate the operating income and operating income as a percentage of revenues for each product line.

c. Comment on your answers in requirements 1 and 2.

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Revenues Cost of goods sold Cost of bottles returned Number of purchase orders placed Number of deliveries received Hours of shelf-stocking time Items sold Soft Drinks Fresh Produce Packaged Food $317,400 $840,240 $483,960 $240,000 $600,000 $360,000 $ 4,800 $ 0 $ 0 144 336 144 120 876 264 216 2,160 1,080 50,400 441,600 122,400