Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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.

2. Prepare a product-line profitability report for SFS using the ABC information the controller provides.

image text in transcribedimage text in transcribed Prepare a product-line profitability report for SFS under the current costing system minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should Prepare a product-line profitability report for SFS using the ABC information the controll indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 Round your other answers to nearest whole dollar.) Prepare a product-line profitability report for SFS under the current costing system minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should Prepare a product-line profitability report for SFS using the ABC information the controll indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 Round your other answers to nearest whole dollar.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Top Accounting And Auditing Issues For 2023

Authors: CCH Tax Law Editors

1st Edition

0808059335, 978-0808059332

More Books

Students also viewed these Accounting questions

Question

Choose an appropriate organizational pattern for your speech

Answered: 1 week ago

Question

Writing a Strong Conclusion

Answered: 1 week ago