Question
Greg's Supermarket has decided to expand its flagship Toronto store. It would like information about profitability of three product lines: drinks, produce, and packaged food.Following
Greg's Supermarket has decided to expand its flagship Toronto store. It would like information about profitability of three product lines: drinks, produce, and packaged food.Following information for2022 is available:$$RevenuesCost of Goods SoldCost of Bottles ReturnedNumber of Purchase Orders PlacedNumber of Deliveries ReceivedHours of shelf-stocking TimeItems SoldDrinks317,400240,0004,800 $14412021650,400Fresh Produce840,240 S600,000Packaged Food483,960360,0003368762,160441,6001442641,080122,400Greg's also provided the following information for the year:Description of ActivityTotal CostCost-Allocation BaseActivityBottle ReturnsReturning empty bottles to storeS4,800 Direct tracing to drinksOrderingDeliveryShelf-stockingCustomer SupportPlacing of orders for purchasePhysical delivery and receipt of merchandiseStockin of merchanise on store shelves and ongoing restockingAssistance provided to customers, including checkout and bagging62,400 624 purchase orders100,800 1,2600 deliveries3,456 hours of shelf-69,120 stocking time$122,880 614,400 items sold360,000TotalRequired:Q24 - Greg's currently allocates store support costs (all costs other than cost of goods sold) to product lines on the basis of the proportion of the cost of goods sold of each product line. Calculate the operating income and operating income as a % of revenue for each product line. (3 points)Q25 - Greg's is considering allocating support costs (all costs other than cost of goods sold) to product lines using an ABC system. Calculate the operating income and operating income as a % of revenue for each product line if this system is implemented. (10 points)026 - Comment on your findings regarding the implications of using different allocation methods above (1* vs. 2.) for Greg's analysis and possibly expansion considerations (6 points)
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