Question 2 (10 Marks) If Fresh Foods Supermarket allocates store support costs to product lines using an Activity based costing system, calculate the operating income for each product line Question 3 (10 Marks) Give your comments on the Operating Income computed based on current allocation of store support costs. On a comparative basis which one of the product lines is generating more operating revenue as a percentage of revenue and what are your recommendations Case Study Name: Fresh Foods Supermarket Fresh Foods Supermarket is a retail chain of supermarkets having operations in various cities in India. The company has sought information on the profitability of each product line, viz. Beverages Fresh Produce and Packaged Food. The following data is available for the year 2018 (amounts in INR 000s) Particulars Beverages Fresh Produce Packaged Food Revenues 317.400 840,240 483,960 Cost of goods sold 240,000 600,000 360,000 Cost of bottles returned 4,800 Number of purchase orders 144 336 144 placed Number of deliveries received 120 264 Hours of shelf-stocking time 216 2,160 1,080 Items sold 50,400 441,600 122,400 The following additional information is provided by the company 0 Question 4 (10 Marks) Give your comments on the Operating Income computed based on allocation of store support costs on Activity Based Costing System. On a comparative basis which one of the product lines is generating more operating revenue as a percentage of revenue. 876 Question 5 (10 Marks) Compare the results of current allocation of store support costs with the Activity Based Costing and give your comments on how they are different and what is actually causing the difference in the results. The following additional information is provided by the company ACTIVITY DESCRIPTION TOTAL COST ALLOCATION COSTS BASE Bottle Returning of empty bottles to store 4,800 Direct tracing to Returns beverages line Ordering Placing of orders for purchases 62.400 624 purchase orders released Delivery Physical delivery and receipt of 100,800 1,260 deliveries merchandise Shelf Stocking of merchandise on the 69,120 3,456 hours of shelf- Stocking shelves of the store and ongoing stocking time restocking Customer Assistance provided to customers, 122,880 614,400 items sold Support including checkout and bagging TOTAL 360,000 Question 1 (10 Marks) Fresh Foods Supermarket is currently allocating store support costs (all costs other than cost of goods sold) to product lines on the basis of cost of goods sold of each product line. Calculate the operating income and operating income as a percentage of revenue for each product line