Question 5 (15 marks) e. "If GPF's senior management team puts more efforts to improve the sales performance in a certain product item because its reported costs are smaller than its actual costs, it will lead to greater long-term profits to the shareholders. True or False? Explain briefly (max. ONE sentence). (3 marks) Geunhye-Park Foods (GPF) operates at capacity and consider to apply ABC analysis to three product lines: tofu, milk, and ramen. GPF's CFO, Kerry Serious Lamb, identifies four activities and their activity cost rates as follows: Ordering $102 per purchase order Delivery and receipt of merchandise $78 per delivery Shelf-stocking $21 per hour Customer support and assistance $0.22 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 (year 2019) are as follows: Milk Ramen $66,000 $48,000 $14,400 $51,000 $34,000 $10,200 Year 2019 Tofu Financial data Revenues $59,000 Cost of goods sold $36,000 Store support $10,800 Activity-area usage (cost-allocation base) Ordering (purchase orders) 25 Delivery (deliveries) 90 Shelf-stocking (hours) 190 Customer support (items sold) 13,500 20 15 35 30 40 180 17,500 8,000 Under its simple costing system, GPF allocated support costs to products at the rate of 30% of cost of goods sold. Profitability is measured by Operating income - Revenues. Required: a. Using the simple costing system, calculate the operating income of Tofu. (2 marks) b. Using ABC, calculate the operating income of company-wide total operating income. (3 marks) c. Using ABC, determine the ranking of profitability among the three product lines. (i.e., specify the highest, the middle, and the lowest profitable product line.) (3 marks) d. The COVID-19 pandemic has hit the company's business significantly. Specifically, the company expects that, in year 2020, there will be no shelf-stocking activities but an 100% increase of delivery activities for every product line as below. Pandamic effect on GPF operation (Year 2020) Activity Cost Allocation Rate Toful Milk Ramen Ordering $102 per purchase order 25 20 15 Delivery $78 per delivery 180 70 60 Shelf-stocking $21 per hour 0 0 0 Customer $0.22 per item sold 13,500 17,500 8,000 support If everything else is equal, provide the annual change of total operating income under ABC (i.e., total operating income under ABC in 2020 minus total operating income under ABC in 2019). (4 marks)