Fresh Daily convenience store based in Camberwell specialises in selling organic products. Fresh Daily convenience store prepares and bottles the juices in store from the fresh organic produce it sources. Alongside selling to retail customers walking into the store, Fresh Daily convenience stores also accepts and delivers bulk grocery orders to speciality restaurants around Melbourne. Jeff Musk, owner of the convenience store seeks your help in generating insights about the profitability of individual product lines: Juices, Fresh produce, and Packaged food. Jeff provides you the following data generated from his management information system for the last 12 months

Fresh Daily convenience store currently allocates support cost (all cost other than cost of goods sold) to product lines at 25% of the cost of goods sold of each product line.

Required

(a) Calculate the operating profit and operating profit as a percentage of sales revenue for each product line using the supermarket's existing costing system.

(b) If Fresh Daily convenience store allocated support costs to product lines using activitybased costing system, what would be the operating profit and operating profit as a percentage of sales revenue for each product line.

(c) Provide 3 key insights to Jeff Musk by comparing and analysing your answers to requirements (a) and (b) above
 

Fresh produce Packaged food $10,053,000 $8,250,000 Particulars Juices $3,697,500 $1,500,000 $6,094,500 $5,250,000 Revenues Cost of goods sold Returning, cleaning and relabelling empty bottles Number of orders placed Number of deliveries made Hours of shelf-stocking time $45,000 $0 $0 360 840 360 300 2,190 660 540 5,400 1,104,000 2,700 Invoices 126,000 306,000 Jeff also provides the following information in relation to the last 12 months: Cost allocation base Activity Placing orders for purchases Delivering orders to speciality restaurants Shelf stocking Customer support Cost $795,000 16,250 purchase orders $1,260,000 3,150 deliveries $900,000 8,640 hours of shelf stocking time $750,000 1,500,000 invoices