Fitzgerald Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows:

Ordering ..........................................$95 per purchase order

Delivery and receipt of merchandise .........$76 per delivery

Shelf-stocking ...................................$19 per hour

Customer support and assistance .............$ 0.15 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 are as follows:

Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold.
1. Use the simple costing system to prepare a product-line profitability report for FS.
2. Use the ABC system to prepare 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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Baked Goods Milk and Fruit Juice Frozen Products Financial data Revenues Cost of goods sold Store support $60,000 $41,000 $12,300 $66,500 $51,000 $15,300 $50,500 32,000 $ 9,600 Activity-area usage (cost-allocation base) Ordering (purchase orders) Delivery (deliveries) Shelf-stocking (hours) Customer support (items sold) 120 170 15,400 24 60 150 20,200 14 36 20 7,960