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:      Frozen Foods Baked Goods Fresh Produce Sales $ 120,000 $ 91,000 $ 158,175 Cost of goods sold 105,000 67,000 110,000   SFS estimates that store support expenses, in total, are approximately 20% 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:   Activity (cost driver) Frozen Foods Baked Goods Fresh Produce Order processing (number of purchase orders) 10 45 100 Receiving (number of deliveries) 12 55 120 Shelf-stocking (number of hours per delivery) 2 0.5 4 Customer support (total units sold) 30,000 40,000 86,000   The controller estimates activity-cost rates for each activity as follows:   Order processing $ 80 per purchase order Receiving 110 per delivery Shelf-stocking 15.25 per hour Customer support 0.21 per item   Required: 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 (i.e. .2134 should be entered as 21.34%).)                                               Cost of goods sold Customer support Order processing Receiving Sales Shelf-stocking Store support                 Frozen Food Baked Goods Fresh Produce                                                         Operating income (loss)             Operating margin (loss)   %   %   %   Prepare a product-line profitability report for SFS using the ABC information the controller provides. (Loss amounts should be indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should be entered as 21.34%). Round your other answers to nearest whole dollar.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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: 

 

 

Frozen Foods

Baked Goods

Fresh Produce

Sales

$ 120,000

$ 91,000

$ 158,175

Cost of goods sold

105,000

67,000

110,000

 

SFS estimates that store support expenses, in total, are approximately 20% 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:

 

Activity (cost driver)

Frozen Foods

Baked Goods

Fresh Produce

Order processing (number of purchase orders)

10

45

100

Receiving (number of deliveries)

12

55

120

Shelf-stocking (number of hours per delivery)

2

0.5

4

Customer support (total units sold)

30,000

40,000

86,000

 

The controller estimates activity-cost rates for each activity as follows:

 

Order processing

$ 80

per purchase order

Receiving

110

per delivery

Shelf-stocking

15.25

per hour

Customer support

0.21

per item

 

Required:

  1. 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 (i.e. .2134 should be entered as 21.34%).)                                              
  • Cost of goods sold
  • Customer support
  • Order processing
  • Receiving
  • Sales
  • Shelf-stocking
  • Store support

 

 

   
 

 

 
 

Frozen Food

Baked Goods

Fresh Produce

             
             
             
             

Operating income (loss)

           

Operating margin (loss)

 

%

 

%

 

%

 

Prepare a product-line profitability report for SFS using the ABC information the controller provides. (Loss amounts should be indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should be entered as 21.34%). Round your other answers to nearest whole dollar.)

 

  • Cost of goods sold
  • Customer support
  • Order processing
  • Receiving
  • Sales
  • Shelf-stocking
   
 

 

 
 

Frozen Food

Baked Goods

Fresh Produce

             
             
             

Store support:

           
             
             
             
             
             

Total store support cost

           

Operating income (loss)

           

Operating margin (loss)

 

%

 

%

 

%

 

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