Problem$-3$

Grocery Mart wants information about the profitability of individual product lines: Dairy

Products, Bakery Items, and Frozen Foods. Grocery Mart provides the following data for the

year $2024-25$ for each product line:

Product Line

Dairy Products Bakery Items Frozen Foods

Revenues

$$950,000$

$$1,850,000$

COGS

$$1,375,000$

$$700,000$

$$1,300,000$

Cost of Packaging

$$950,000$

$$15,000-$

Number of Orders

$$5,000$

$400$

$760$

Number of Deliveries

$350$

$1,900$

$440$

Hours of Shelf Stocking

$750$

$650$

$4,500$

Items Sold

$3,000$

$150,000$

$900,000$

Grocery Mart also provides the following information for the year $2024-25$:

Activity

Description

of

the

$450,000$

Cost$-$Allocation Base

Activity

Total

Cost

Packaging

Packaging of products

$$20,000$

Directly traced to respective

product lines

Ordering

Placing of orders for

purchases

$$180,0001,600$ purchase orders

Delivery

Physical delivery of goods $$275,0003,000$ deliveries

Shelf Stocking

Stocking of goods on

shelves

$$195,0008,150$ hours of shelf$-$stocking

Customer

Assistance

Required:

Providing assistance to

customers

$$350,0001,500,000$ items sold

a$.$ Grocery Mart currently allocates support costs $($all costs other than the cost of goods sold$)$ to

product lines based on the cost of goods sold of each product line. Calculate the operating

income and operating income as a percentage of revenues for each product line.

b$.$ If Grocery Mart allocates support costs to product lines using an activity$-$based costing

system, calculate the operating income and operating income as a percentage of revenues for

each product line.