Question: ABC, retail product-line profitability. Fitzgerald 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:
Ordering $95 per purchase order
Delievery and receipt of merchandise $76 per delievery
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:
Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold.
1. Use the simple costing system to prepare a product-line profitability report for FS.
2. Use the ABC system to prepare a product-line profitability report for FS.
3. What new insights does the ABC system in requirement 2 provide to FS managers?