Harry Super-Store (HS) operates at capacity and decides to apply ABC analysis to three product lines: food, home utensils and lifestyle products. It identifies four activities and their activity cost rates as follows:

Ordering $51 per purchase order

Delivery and receipt of merchandise $39 per delivery

Shelf-stocking $42 per hour

Customer support and assistance $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

			Food	Home utensils	Lifestyle product
Financial data
Revenues			59500.00	66000.00	51000.00
Cost of goods sold			36000.00	48000.00	34000.00
Store support			10800.00	14400.00	10200.00
Activity-area usage (cost-allocation base)
Ordering (purchase orders)			50	40	30
Delivery (deliveries)			180	70	60
Shelf-stocking (hours)			95	90	20
Customer support (items sold)			13500	17500	8000

Under its simple costing system, HS allocated support costs to products at the rate of 30% of cost of goods sold.

Required

a Use the simple costing system to prepare a product-line profitability report for HS. (8 marks)

b Use the ABC system to prepare a product-line profitability report for HS. (14 marks)

c What new insights does the ABC system in requirement (b) provide to HS managers? (6 marks)