Question 2: South-Yara Ltd is a distributor of pharmaceutical products. Its ABC system has five activities: 1 WN Activity area Store deliveries Carton Deliveries Shelf-stocking Order processing Line-item ordering Cost-driver rate in 2015 $ 50 per store delivery $ 1 per carton $ 16 per stocking-hour $ 40 per order $ 3 per line Item 4 5 Jasvinder Sidhu, the management accountant of South Yara Ltd, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the single-store distribution market. Two customers are used to exemplify the insight available with the ABC approach. Data pertaining to these two customers in September 2015 are as follows: Total orders Average line items per order Total store deliveries Average cartons shipped per store delivery Average hours of shelf-stocking per store delivery Average revenue for delivery Average cost of goods sold for delivery Terry white Pharmacy Peoples Pharmacy 13 10 9 18 7 10 22 20 0 0.5 $4,800 $4,200 $3,600 $3,300 Pate of 30% of cost of goods sold. REQUIRED a) Compute the product line (i.e. Baked Goods, Milk & Fruit Juice and Frozen products) profitability using simple costing system for IS. For each product, you should calculate operating profit and operating profit as a percentage of revenue. b) Under the ABC system, calculate the product- line profitability for IS. For each product, you should calculate operating profit and operating profit as a percentage of revenue. c) Compare the profitability percentages under simple costing system and ABC system and explain what new insights that the ABC system provide to the management of IS. Question 2: South-Yara Ltd is a distributor of pharmaceutical products. Its ABC system has five activities: 1 WN Activity area Store deliveries Carton Deliveries Shelf-stocking Order processing Line-item ordering Cost-driver rate in 2015 $ 50 per store delivery $ 1 per carton $ 16 per stocking-hour $ 40 per order $ 3 per line Item 4 5 Jasvinder Sidhu, the management accountant of South Yara Ltd, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the single-store distribution market. Two customers are used to exemplify the insight available with the ABC approach. Data pertaining to these two customers in September 2015 are as follows: Total orders Average line items per order Total store deliveries Average cartons shipped per store delivery Average hours of shelf-stocking per store delivery Average revenue for delivery Average cost of goods sold for delivery Terry white Pharmacy Peoples Pharmacy 13 10 9 18 7 10 22 20 0 0.5 $4,800 $4,200 $3,600 $3,300 Pate of 30% of cost of goods sold. REQUIRED a) Compute the product line (i.e. Baked Goods, Milk & Fruit Juice and Frozen products) profitability using simple costing system for IS. For each product, you should calculate operating profit and operating profit as a percentage of revenue. b) Under the ABC system, calculate the product- line profitability for IS. For each product, you should calculate operating profit and operating profit as a percentage of revenue. c) Compare the profitability percentages under simple costing system and ABC system and explain what new insights that the ABC system provide to the management of IS
