three prodies Pvt$.$ Ltd$.$ operates at capacity and decides to apply ABC analysis to and their lines: ice cream, milk shake, and yogurt. It identifies four activities

$[12]$

and their activity cost driver rates are as follows:

Ordering $-$ Rs$.1000$ per purchase order

Delivery and receipt of merchandise $-$ Rs$.800$ per delivery

Shelf$-$stocking $-$ Rs$.200$ per hour

Customer support and assistance $-$ Rs$.2$ per item sold

The revenues, cost of goods sold, store support costs, the activities that account for the store support costs, and activity$-$area usage of the three product lines are as follows:

$\backslash$table$[[$Particulars$,$Ice Cream,Milk Shake,Yogurt,Total$],[$Revenue $($in Rs$.),1425000,1575000,1300000,4300000],[\backslash$table$[[$Cost of goods sold $($in$],[$Rs$.)]],912000,1128000,840000,2880000],[\backslash$table$[[$Support costs $($allocated$],[$as $25\%$ of COGS$)($in$],[$Rs$.)]],228000,282000,210000,720000],[\backslash$table$[[$Activity Drivers$]],,,,],[$Purchase orders,$60,50,26,136],[$Deliveries$,196,72,56,324],[$Shelf$-$stocking hours,$366,332,48,746],[$Items sold,,$41000,15800,87800]]$

Previous costing system used cost of goods sold $($COGS$)$ as a basis to allocate support costs. Blanket rate of $25\%$ of COGS was used to allocate support costs. You are required to:

a$.$ Prepare profitability report showing operating profit and margins as per the previous costing system.

b$.$ Estimate the support costs for each product line using ABC system.

c$.$ Prepare profitability report showing operating profit and margins as per ABC system.

d$.$ Comment on new insights that ABC system provides to ice & Shakes Pvt$.$ Ltd$.\text{'}$s managers $($based on your calculations$).$