5.12 Cost allocation with a non-financial variable, retailing. (15-20 minutes) Jyvaskyla Oy is a retail chain of supermarkets. For many years, it has used gross margin (selling price minus cost of goods sold) to guide it in deciding on which products to emphasise or de-emphasise. And, for many years, it has not allocated any costs to products It changed its internal reporting system recently and goods handling costs are now allo- cated to individual products on the basis of cubic volume. (Most products are delivered to the shelves in cartons. A detailed study showed that cubic volume was the major driver of Jyvaskyla's goods handling costs. These costs make up over 30% of non-cost-of-goods-sold costs of Jyvaskyla.) The following data focus on four products in April 2008 Cost of goods purchased Revenue Volume (cubic metres) Product per carton r carton Breakfast cereal Dairy product Paper towels Toothpaste 82 64 36 100 56 52 26 74 24 12 24 12 Each supermarket has a weekly report on product contribution: Revenue Cost of goods sold Gross margin (GM) Goods handling costs Product contribution (PC) GM -ID The April 2008 goods-handling cost allocation rate is 0.50 per cubic metre Required 1 Calculate the gross margin for each of the four products. Rank these four products using their gross margin percentage ucts using the product contribution to revenue percentage ment 2 analysis useful to Jyvaskyla management? 2 Calculate the product contribution for each of the four products. Rank these four prod 3 Compare your ranking in requirement 2 with that in requirement 1. How is the require