Problem 1: Family Supermarkets (FS) has decided to increase the size of its Memphis store. It...

 

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Problem 1: 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 2011 for each product line: Revenues Cost of goods sold Cost of bottles returned Number of purchase orders placed Number of deliveries received 120 216 Hours of shelf-stocking time Items sold 50,400 FS also provides the following information for 2011: Activity (1) 1. Bottle returns Soft Drinks $317,400 $240,000 $ 4,800 144 2. Ordering 3. Delivery 4. Shelf-stocking 5. Customer support Total Required Description of Activity (2) Returning of empty bottles to store Placing of orders for purchases Physical delivery and receipt of merchandise Stocking of merchandise on store shelves and ongoing restocking Assistance provided to customers, including checkout and bagging Fresh Produce $840,240 $600,000 $ 0 336 876 2,160 441,600 Total Support Costs (3) $ 4,800 $ 62,400 $100,800 $ 69,120 $122,880 $360,000 Packaged Food $483,960 $360,000 $ 0 144 1,080 122,400 Cost-Allocation Base (4) Direct tracing to soft- drink line 624 purchase orders 1,260 deliveries 3,456 hours of shelf- stocking time 614,400 items sold 1. 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. 2. 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. Problem 1: 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 2011 for each product line: Revenues Cost of goods sold Cost of bottles returned Number of purchase orders placed Number of deliveries received 120 216 Hours of shelf-stocking time Items sold 50,400 FS also provides the following information for 2011: Activity (1) 1. Bottle returns Soft Drinks $317,400 $240,000 $ 4,800 144 2. Ordering 3. Delivery 4. Shelf-stocking 5. Customer support Total Required Description of Activity (2) Returning of empty bottles to store Placing of orders for purchases Physical delivery and receipt of merchandise Stocking of merchandise on store shelves and ongoing restocking Assistance provided to customers, including checkout and bagging Fresh Produce $840,240 $600,000 $ 0 336 876 2,160 441,600 Total Support Costs (3) $ 4,800 $ 62,400 $100,800 $ 69,120 $122,880 $360,000 Packaged Food $483,960 $360,000 $ 0 144 1,080 122,400 Cost-Allocation Base (4) Direct tracing to soft- drink line 624 purchase orders 1,260 deliveries 3,456 hours of shelf- stocking time 614,400 items sold 1. 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. 2. 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.

Answer rating: 100% (QA)

1 Calculation of operating income when support costs are allocated on the basis of cost of goods sol... View the full answer