JoeMart Food Stores (JFS) has experienced net operating losses in one of its product line in...

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JoeMart Food Stores (JFS) has experienced net operating losses in one of its product line in the last few months. Management believes that the store can improve its profitability if JFS discontinues the unprofitable product line. The revenue and costs from the most recent period are: Sales Direct costs Product Line AGC CMM KGM RM96,000 RM84,000 RM72,800 RM53,600 RM126,540 RM88,000 In addition, JFS estimates that the indirect costs, store support expenses, in total, were approximately 20% of revenues. Having attended a management accounting course on activity-based costing (ABC) recently, Joe, the owner realized that not every sales dollars requires or uses the same amount of store support activities. Thus, in considering the decision to discontinue the unprofitable product line, Joe managed to gather some information concerning its product costing using ABC. A preliminary analysis reveals store support activities for these three product lines are: Activity (cost driver) AGC Product Line CMM KGM Order processing (number of purchase order) Receiving (number of deliveries) 8 35 80 10 40 90 Shelf-stocking (number of hours per delivery) Customer support (total units sold) 2 0.4 3 24,000 32,000 68,000 JoeMart Food Stores (JFS) has experienced net operating losses in one of its product line in the last few months. Management believes that the store can improve its profitability if JFS discontinues the unprofitable product line. The revenue and costs from the most recent period are: Sales Direct costs Product Line AGC CMM KGM RM96,000 RM84,000 RM72,800 RM53,600 RM126,540 RM88,000 In addition, JFS estimates that the indirect costs, store support expenses, in total, were approximately 20% of revenues. Having attended a management accounting course on activity-based costing (ABC) recently, Joe, the owner realized that not every sales dollars requires or uses the same amount of store support activities. Thus, in considering the decision to discontinue the unprofitable product line, Joe managed to gather some information concerning its product costing using ABC. A preliminary analysis reveals store support activities for these three product lines are: Activity (cost driver) AGC Product Line CMM KGM Order processing (number of purchase order) Receiving (number of deliveries) 8 35 80 10 40 90 Shelf-stocking (number of hours per delivery) Customer support (total units sold) 2 0.4 3 24,000 32,000 68,000