Zooki is an F&B concept located at USEK that sells Catering Boxes, Diet Boxes, and Coffee. Zooki management decided to allocate its indirect costs to each product line using the cost of goods of each product line.

Below are some data related to the different product line

Zooki

Product Line Information

For the Year Ended December 31, 2020

Catering boxes

Diet Boxes

Coffee

Revenues

$ 4,000,000

$ 2,500,000

$ 750,000

Cost of Goods

$ 2,500,000

$ 1,800,000

$ 600,000

Cost of Housekeeping

$ 25,000

Number of orders placed

3,000

2,750

2,250

Number of deliveries received

1,500

1,800

1,700

Hours of warehousing

16,000

15,000

12,500

Quantity Sold

130,000

120,000

400,000

Zookis indirect costs are as per the below:

Zooki

Indirect Costs Data

For the Year Ended December 31, 2020

Procurement Costs

$ 480,000

Receiving Costs

$ 450,000

Warehouse Costs

$ 500,000

CRM Costs

$ 100,000

Total

$ 1,530,000

Required:

Suppose Zooki uses cost of goods to allocate all indirect costs. Prepare the companys income statement per product line. In addition, do not forget to show the income statement totals of all the product lines combined.

Zooki management decided to improve its costing system by implement an ABC costing for its indirect costs. You are required to identify the different activities available, and work on them in order to come up with an ABC costing for zookis product line. Use the new method for allocating the indirect costs (ABC Costing) that you propose to prepare new product line and total company income statements.

Compare your results in requirement 2 to the results in requirement 1, and comment on it