5-45 Product-Line Profitability, ABC Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Frozen Food Baked Goods Fresh Produce Sales Cost of goods sold $120,000 105,000 $90,000 67,000 $158,125 110,000 SFS estimates that store support expenses are approximately 20 percent of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Frozen Food Baked Goods Fresh Produce Order processing (number of purchase orders) Receiving (number of deliveries) 10 55 90 10 70 120 Shelf-stocking (number of hours per delivery) 2 0.5 4 Customer support (items sold) 30,000 40,000 86,000 Required The controller estimates activity-cost rates for each activity as follows: Order processing Receiving Shelf-stocking Customer support $ 80 per purchase order $110 per delivery $ 15 per hour $0.20 per item 1. Prepare a product-line profitability report for SFS under the current costing system. 2. Prepare a product-line profitability report for SFS using the new information the controller provides. 3. What new insights does the ABC system in requirement 2 provide to SFS managers?