Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows:

(view the activity cost rates.)

Ordering	$95 per purchase order
Delivery and receipt of merchandise	$76 per delivery
Shelf stocking	$19 per hour
Customer support and assistance	$0.15 per item sold

The revenues, cost of goods sold, store support costs, activities that account for the store support costs, and activity-area usage of the three product lines are as follows:

(view the information for the three product lines.)

	Baked Goods	Milk and Fruit Juice	Frozen Products
Financial data
Revenues	$ 60,000	$ 66,500	$ 50,500
Cost of goods sold	$ 41,000	$ 51,000	$ 32,000
Store support	$ 12,300	$ 15,300	$ 9,600
Activity-area usage (cost-allocation base)
Ordering (purchase orders)	44	24	14
Delivery (deliveries)	120	60	36
Shelf stocking (hours)	170	150	20
Customer support (items sold)	15,400	20,200	7,960

Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold.

Read the requirements

1	Use the simple costing system to prepare a product-line profitability report for Upper F FS.
2	Use the ABC system to prepare a product-line profitability report for Upper F FS.
3	What new insights does the ABC system in requirement 2 provide to Upper F FS managers?