Studemeir Paint & Floors (SPF) has experienced net operating losses in its Other Flooring Products line during the last few periods. SPFs management team thinks that the store will improve its profitability if it discontinues the Other Flooring Products line. The operating results from the most recent period are:

	Paint and Paint Supplies			Carpet			Other Flooring Products
Sales	$	295,000		$	214,900		$	167,900
Cost of goods sold		165,000			150,000			135,250

SPF estimates that store support expenses are approximately 24% of revenues.

Harish Rana, SPFs controller, states that while every sale has one purchase order, not every sales dollar requires or uses the same amount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows:

Activity (cost driver)	Paint and Paint Supplies			Carpet			Other Flooring Products
Order processing (number of purchase orders)		425			150			100
Receiving (number of deliveries)		50			120			60
Customer support (hours required per sale)		0.50			8.0			0.75

Harish estimates activity-cost rates for each activity as follows:

Order processing	$	140	per purchase order
Receiving		180	per delivery
Customer support		18	per hour

Required:

1. Prepare a product-line profitability report for SPF under the current costing system.

2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.

Paint & Paint supplies Carpet other flooring products sales COGS $0 SO SO gross margin store support operating income (loss) operating margin (loss) 30 96 Paint & Paint supplies other flooring products Carpet sales COGS S0 SO gross margin store support total store C C support operating income (loss) operating margin (loss) 50 50 96