=+6-33 KK Activity-based costing, retail product-line profitability OBJECTIVE 7 Ocean Supermarkets (OS) 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:

Ordering $100 per purchase order Delivery and receipt of merchandise $80 per delivery Shelf-stocking $20 per hour Customer support and assistance $0.20 per item sold The revenues, cost of goods sold, store support costs and activity-area usage of the three product lines are:

Baked goods Milk and fruit juice Frozen products Financial data Revenues $57 000 $63 000 $52 000 Cost of goods sold $38 000 $47 000 $35 000 Store support $11 400 $14 100 $10 500 Activity-area usage (cost-allocation base)

Ordering (purchase orders) 30 25 13 Delivery (deliveries) 98 36 28 Shelf-stocking (hours) 183 166 24 Customer support (items sold) 15 500 20 500 7 900 Under its simple costing system, OS allocated store support costs to products at the rate of 30% of cost of goods sold.

Required 1 Use the simple costing system to prepare a product-line profitability report for OS. For each product and in total, the report should calculate operating profit and operating profit as a percentage of revenue.