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Management Accounting Australian Mart (AM) operates at capacity and decides to apply ABC analysis to three product lines: pastry and cakes, Dairy Products, and

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Management Accounting Australian Mart (AM) operates at capacity and decides to apply ABC analysis to three product lines: pastry and cakes, Dairy Products, and meat products. It identifies four activities and their activity cost rates as follows: Ordering Delivery and receipt of merchandise Shelf-stocking $100 per purchase order $ 80 per delivery $ 20 per hour Customer support and assistance $ 0.30 per item sold The revenues, cost of goods sold, store support costs, the activities that account for the store su and activity-area usage of the three product lines are as follows: Particulars Fundamentals Revenue Cost of Goods sold Store support Pastry and cakes Dairy Products Meat Products 65000 50000 60000 35000 45000 45000 11000 15100 10500 Activities (Cost allocation base) Ordering (purchasing order) 30 25 13 Delivery (Deliveries) 98 36 28 Shelf-stocking (hours) 183 166 24 . Customer support (item sold) 15500 20500 7900 osts, Under its simple costing system, AM allocated support costs to products at the rate of 30% of cost of goods sold. Require: 1. Elaborate development, challenges and application of activity-based costing in detail (500 words; minimum five references) 2. Use the simple/traditional costing system to prepare a product-line profitability report for AM. 3. Use the ABC system to prepare a product-line profitability report for AM. I 4. What new insights does the ABC system in requirement provide to AM managers (300 words)? 5. "ABC system motivates sustainability and better decision making in organization" would you agree? Justify (500 words; minimum five references). Page 3

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