1. Using the ABC analysis, determine new segment profitability statements.

2. Based on your analysis in questions 1 and 2, what changes would you suggest to General Mills?
    What recommendations do you suggest based on ABC analysis?

The Business Status Pre-ABC Profit and Loss by Segment Pre-ABC Category Impulse Segment Yogurt Shops Total Sales in cases 1,200,000 300,000 1,500,000 Sales revenue $23,880,000 $5,970,000 $29,850,000 Less: price promotions - $ 3,600,000 - $ 900,000 - $ 4,500,000 Net sales $20,280,000 $5,070,000 $25,350,000 - $13.800.000 $ 6,480,000 - $ 1,380,000 - $ 948,000 $ 4,152,000 - $3.450,000 - $17.250.000 $ 8,100,000 $ 1,725,000 Less: cost of goods sold Gross margin $1,620,000 -$ 345,000 -$ 237,000 Less: merchandising - $ 1,185.000 $ 5,190,000 Less: SG&A Net income $1,038,000 ABC Analysis of Cost of Goods Sold Cost of goods sold is made up of $14,250,000 for ingredients, packaging, and storage and $3,000,000 for pick/pack and shipping. Since the product is the same across segments, the cost to produce should be the same. However, pick/pack and shipping costs vary according to whether or not the order is for a full pallet. Full pallets cost $75 to pick and ship whereas individual orders cost $2.25 per case. There are 75 cases in a pallet and the segments differ in their utilization of full pallets, as shown below. Impulse Segment Yogurt Shops Total Cases in full pallets Individual cases 60,000 240,000 300,000 1,140,000 1,200,000 60,000 300,000 1,200,000 1,500,000 Total cases ABC Analysis of Merchandising Merchandising costs consist mainly of kits costing $500 each. A review of where the kits were sent indicated that a total of 3,450 kits were delivered, 90 of them to shops. ABC Analysis of Selling, General, and Administrative (SG&A) the Since sales representatives service several products, their costs were allocated products based on gross sales dollars. GMI gave diaries to 10% of the sales force in randomly selected markets of the country and asked them to track their time in activity classifications for 60 days. The diaries indicated that sales representatives spent much more time per dollar of sale on yogurt than other products. When SG&A costs were allocated based on time, the total allocation to yogurt jumped from $1,185,000 to $3,900,000. Of their time spent on yogurt, only 1% of the time was spent on the shops. rious