70.2K

Verified Solution

Link Copied!

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: Sales Cost of goods sold Frozen Foods $ 137,000 120,000 Order processing Receiving Shelf-stocking Customer support Baked Goods $ 121,000 89,000 SFS estimates that store support expenses, in total, are approximately 24% 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: $83 106 13.00 0.22 Fresh Produce $ 195,000 137,000 Activity (cost driver) Order processing (number of purchase orders) Receiving (number of deliveries) Shelf-stocking (number of hours per delivery) Customer support (total units sold) The controller estimates activity-cost rates for each activity as follows: per purchase order per delivery per hour per item Frozen Foods 9 14 6 25,000 Baked Goods 47 49 0.5 30,000 Fresh Produce 101 132 9 60,000 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.

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 tecent period are: SFS estimates that store support expenses, in total, are approximately 24% 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: The controller estimates activity cost rates for coch activity as follows: 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. Complete this question by entering your answers in the tabs below. 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 (1.e. 0.2134 should be entered as 21.34% ).) Prepare a product-fine profitability report for SFS using the ABC information the controller provides. (Loss amounts should be indicated by o minus sign. Round operating margin (loss) to 2 decimal places (i.e. 0.2134 should be entered as 21 . J49\%) Round all other answers to nearest whole dollar

Answer & Explanation Solved by verified expert

See Answer