CarlsonCarlson Supermarkets (Upper CCS) operates at capacity and decides to appl
ID: 2546365 • Letter: C
Question
CarlsonCarlson
Supermarkets
(Upper CCS)
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:
LOADING...
Ordering
$ 102$102
Delivery and receipt of merchandise
$ 78$78
Shelf-stocking
$ 21$21
Customer support and assistance
$ 0.22$0.22
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:
LOADING...
Milk and
Frozen
Baked Goods
Fruit Juice
Products
Financial data
Revenues
$60,000
$66,000
$52,500
Cost of goods sold
$36,000
$48,000
$34,000
Store support
$10,800
$14,400
$10,200
Activity-area usage
(cost-allocation base)
Ordering (purchase orders)
25
20
15
Delivery (deliveries)
90
35
30
Shelf-stocking (hours)
190
180
40
Customer support (items sold)
13,500
17,500
8,000
Under its simple costing system,
Upper CCS
allocated support costs to products at the rate of30% of cost of goods sold.
Requirements
1.
Upper CCS.
2.
Upper CCS.
3.
Upper CCS
Requirement 1. Use the simple costing system to prepare a product-line profitability report for
Upper CCS.
(Round the percentages to the nearest hundredth percent, X.XX%.)
Milk and
Frozen
Baked Goods
Fruit Juice
Products
Total
Revenues
Costs
Cost of goods sold
Store support
Total costs
Operating income
Operating income/Revenues
%
%
%
%
Ordering
$ 102$102
per purchase orderDelivery and receipt of merchandise
$ 78$78
per deliveryShelf-stocking
$ 21$21
per hourCustomer support and assistance
$ 0.22$0.22
per item soldExplanation / Answer
1. Income Statement under Simple Costing Baked Goods Fruit Juice Frozen Product Revenue $60,000 $66,000 $52,500 Less: Cost of Goods Sold -$36,000 -$48,000 -$34,000 Gross Margin $24,000 $18,000 $18,500 Less:Other Operating Expense Support Cost -$10,800 -$14,400 -$10,200 Net Income $13,200 $3,600 $8,300 Operating Income % 22% 5% 16% 2. Income Statement under Activity Based Costing Baked Goods Fruit Juice Frozen Product Revenue $60,000 $66,000 $52,500 Less: Cost of Goods Sold -$36,000 -$48,000 -$34,000 Gross Margin(1) $24,000 $18,000 $18,500 Less:Other Operating Expense Less: Activities Cost Ordering Cost $2,550 $2,040 $1,530 Delivery and Receipt of Merchandise $7,020 $2,730 $2,340 Shelf Shocking $3,990 $3,780 $840 Customer Support and Assistance $2,970 $3,850 $1,760 Total Activities Cost (2) $16,530 $12,400 $6,470 Net Income(1-2) $7,470 $5,600 $12,030 Working Note Showing Allocation of Cost Baked Goods Fruit Juice Frozen Product Ordering Purchase Order 25 20 15 Ordering Cost ($102/Order) $2,550 $2,040 $1,530 Delivery( Deliveries) 90 35 30 Delivery and Receipt of Merchandise ($78/Delivery) $7,020 $2,730 $2,340 Shelf Stocking ( Hours) 190 180 40 Shelf Shocking ($21/Hour) $3,990 $3,780 $840 Customer Support ( Items Sold) 13500 17500 8000 Customer Support and Assistance ($0.22/items Sold) $2,970 $3,850 $1,760 3. As per Simple costing system, profitability of Baked goods is higher as compare with the rest of the product while as per ABC costing, Frozen Product is higer as compare with other product. Further Profitability for all the product are showing on least side as per ABC Costing System