Question
Could you help to answer the following quesiton B. Harmon Supermarkets (HS) decides to apply ABC analysis to three product lines: Dry Goods, Milk and
Could you help to answer the following quesiton
B. Harmon Supermarkets (HS) decides to apply ABC analysis to three product lines: Dry Goods, Milk and Fruit Juice, and Frozen Goods. It identifies four activities and their activity cost rates;
Ordering $80 per purchase order
Delivery and receipt of merchandise $60 per delivery
Shelf-stocking $15 per hours
Customer support and assistance $0.18 per item sold
The revenues, cost of goods sold, store support cost, and activity-area usage of the three product lines are:
Financial data
Revenues $60,000 $65,000 $52,000
Cost of goods sold $40,000 $48,000 $35,000
Store support $12,000 $14,000 $11,000
Activity-area usage (cost-allocation base)
Ordering (purchase orders) 28 25 12
Delivery (deliveries) 98 36 26
Shelf-stocking (hours) 180 164 22
Customer support (item sold) 15,250 20,500 7,800
Under its simple costing system, HS allocated support costs to products at the rate 25% of cost of goods sold.
Use the simple costing system to prepare a product-line profitability, report for HS.
Use the ABC system to prepare a product-line profitability report for HS.
What new insights does the ABC system in requirement 2 provide to HS managers?
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