ABC, retail product-line profitability. Family 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:
The revenues, cost of goods sold, store support costs, and activity-area usage of the three product lines are:
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 ES.
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?