CarlsonCarlson

Supermarkets

(Upper CCS)

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:

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Ordering	$ 102$102 per purchase order
Delivery and receipt of merchandise	$ 78$78 per delivery
Shelf-stocking	$ 21$21 per hour
Customer support and assistance	$ 0.22$0.22 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:

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Milk and	Frozen
	Baked Goods	Fruit Juice	Products
Financial data
Revenues	$60,000	$66,000	$52,500
Cost of goods sold	$36,000	$48,000	$34,000
Store support	$10,800	$14,400	$10,200

Activity-area usage
(cost-allocation base)
Ordering (purchase orders)	25	20	15
Delivery (deliveries)	90	35	30
Shelf-stocking (hours)	190	180	40
Customer support (items sold)	13,500	17,500	8,000

Under its simple costing system,

Upper CCS

allocated support costs to products at the rate of30% of cost of goods sold.

Requirements

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

Requirement 1. Use the simple costing system to prepare a product-line profitability report for

Upper CCS.

(Round the percentages to the nearest hundredth percent, X.XX%.)

			Milk and		Frozen
	Baked Goods		Fruit Juice		Products		Total
Revenues
Costs
Cost of goods sold
Store support
Total costs
Operating income
Operating income/Revenues		%		%		%		%