Jyvaskyla Oy is a retail chain of supermarkets. For many years, it has used gross margin (selling price minus cost of goods sold) to guide it in deciding on which products to emphasise or de-emphasise.

And, for many years, it has not allocated any costs to products. It changed its internal reporting system recently and goods-handling costs are now allocated to individual products on the basis of cubic volume. (Most products are delivered to the shelves in cartons. A detailed study showed that cubic volume was the major driver of Jyvaskyla’s goods-handling costs. These costs make up over 30% of non-cost-of-goods-sold costs of Jyvaskyla.) The following data focus on four products in April 2022:

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Product Breakfast cereal Dairy product Paper towels Toothpaste Revenue per carton Cost of goods purchased per carton 82 56 64 52 36 26 100 74 Each supermarket has a weekly report on product contribution: Revenue Cost of goods sold R C Gross margin (GM) Goods-handling costs R-C Product contribution (PC) GM-D Volume (cubic metres) 24 12 24 12 The April 2022 goods-handling cost allocation rate is 0.50 per cubic metre. Required 1 Calculate the gross margin for each of the four products. Rank these four products using their gross margin percentage. 2 Calculate the product contribution for each of the four products. Rank these four products using the product contribution to revenue percentage. 3 Compare your ranking in requirement 2 with that in requirement 1. How is the requirement 2 analysis useful to Jyvaskyla management?