1. Use the simple costing system to prepare a product-line profitability report for HS. 2. Use the ABC system to prepare a product-line profitability report for HS. 3. What new insights does the ABC system in requirement 2 provide to HS managers?

5-27 ABC, retail product-line profitability. Henderson Supermarkets (HS) 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 $ 104 per purchase order Delivery and receipt of merchandise $ 80 per delivery Shelf-stocking $ 22 per hour Customer support and assistance $0.25 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: Baked Goods Milk and Fruit Juice Frozen Products Financial data Revenues $63,000 $68,500 $54,000 Cost of goods sold $39,000 $52,000 $36,000 Store support $11,700 $15,600 $10,800 Activity-area usage (cost-allocation base) Ordering (purchase orders) Delivery (deliveries) 32 26 Shelf-stocking (hours) 185 176 Customer support (items sold) 12,200 16,400 7,600 Under its simple costing system, HS 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 HS. 2. Use the ABC system to prepare a product-line profitability report for HS. 3. What new insights does the ABC system in requirement 2 provide to HS managers