ABC, retail product line profitability. Family Supermarkets (FS) found that its ABC analysis

(see p. 174) 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 Delivery and receipt of merchandise Shelf-stocking Customer support and assistance

$120 per purchase order

$96 per delivery

$24 per hour

$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:

Baked Milk and Frozen Goods FruitJuice Products 182 CHAPTER 5 Financial data:

Revenues $68,400 $75,600 $62,400 Cost of goods sold 45,600 56,400 42,000 Store support 13,680 16,920 12,600 Activity area usage (cost driver):

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 There are no bottle returns for any ofthese 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?