Family Supermarkets (FS) found that its ABC analysis (see p. 170) provided important insights. FS extends the

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Family Supermarkets (FS) found that its ABC analysis (see p. 170) provided important insights. FS extends the analysis to cover three more product lines: baked goods, milk and fruit juice, and frozen products. It identifies four activities and activity cost rates for each activity as:

Ordering ...................$120 per purchase order

Delivery and receipt of merchandise ........ $96 per delivery

Shelf-stocking................ $24 per hour

Customer support and assistance .........$0.24 per item sold

The revenues, cost of goods sold, store support costs, and activity area usage of the three product lines are as follows:

Family Supermarkets (FS) found that its ABC analysis (see p.

There are no bottle returns for any of these three product lines.
REQUIRED
1. Use the previous costing system (support costs allocated to products at the rate of 30% of cost of goods sold) to compute a product line profitability report for FS.
2. Use the ABC system (ordering at $120 per purchase order, delivery at $96 per delivery, shelf-stocking at $24 per hour, and customer support at $0.24 per item sold) to compute a product line profitability report for FS.
3. What new insights does the ABC system in requirement 2 provide to FS managers?

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Cost Accounting A Managerial Emphasis

ISBN: 978-0133392883

6th Canadian edition

Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ

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