Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are:

	Frozen Foods	Baked Goods	Fresh Produce
Sales	$ 120,000	$ 91,000	$ 158,175
Cost of goods sold	105,000	67,000	110,000

SFS estimates that store support expenses, in total, are approximately 20% of revenues.

The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are:

Activity (cost driver)	Frozen Foods	Baked Goods	Fresh Produce
Order processing (number of purchase orders)	10	45	100
Receiving (number of deliveries)	12	55	120
Shelf-stocking (number of hours per delivery)	2	0.5	4
Customer support (total units sold)	30,000	40,000	86,000

The controller estimates activity-cost rates for each activity as follows:

Order processing	$ 80	per purchase order
Receiving	110	per delivery
Shelf-stocking	15.25	per hour
Customer support	0.21	per item

Required:

1. Prepare a product-line profitability report for SFS under the current costing system. (Loss amounts should be indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should be entered as 21.34%).)

Frozen Food	Baked Goods	Fresh Produce
Salesselected answer correct	$120,000selected answer correct		$91,000selected answer correct		$158,175selected answer correct
Cost of goods soldselected answer correct	105,000selected answer correct		67,000selected answer correct		110,000selected answer correct
Gross marginselected answer correct	$15,000		$24,000		$48,175
Store supportselected answer correct	24,000selected answer correct		18,200selected answer correct		31,635selected answer correct
Operating income (loss)	$(9,000)selected answer correct		$5,800selected answer correct		$16,540selected answer correct
Operating margin (loss)	(7.50)selected answer correct	%	6.37selected answer correct	%	10.46selected answer correct

2. Prepare a product-line profitability report for SFS using the ABC information the controller provides. (Loss amounts should be indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should be entered as 21.34%). Round your other answers to nearest whole dollar.)

Frozen Food	Baked Goods	Fresh Produce
Salesselected answer correct	$120,000		$91,000		$158,175
Cost of goods soldselected answer correct	105,000		67,000		110,000
Gross marginselected answer correct	$15,000		$24,000		$48,175
Store support:
Order processingselected answer correct	800		$3,600		$8,000
Receivingselected answer correct	1,320		6,050		13,200
Shelf-stockingselected answer correct	366				7,320
Customer supportselected answer correct	6,300		8,400		18,060
not attempted
Total store support cost	8,786		18,092		46,580
Operating income (loss)	$6,214				$1,595
Operating margin (loss)	5.18	%		%	1.01	%