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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: Sales Cost of goods sold SFS estimates that store support expenses, in total, are approximately 14% 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) Order processing (number of purchase orders) Receiving (number of deliveries) $ Frozen Foods Baked Goods Fresh Produce 267,000 $ 438,000 $ 473,000 249,000 354,000 365,000 Shelf-stocking (number of hours per delivery) Customer support (total units sold) Order processing Receiving Shelf-stocking Customer support The controller estimates activity-cost rates for each activity as follows: Required 1. Required 2 $ Sales Cost of goods sold Gross margin Store support: Total store support cost Operating income (loss) Operating margin (loss) 96 per purchase order 123 per delivery 29.00 per hour 0.19 per item 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. Frozen Foods Baked Goods Fresh Produce 10 57 14 73 4 33,000 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. 0.2134 should be entered as 21.34%). Round all other answers to nearest whole dollar.) $ $ Frozen Food 267,000 249,000 18,000 0 % Baked Goods 0.1 38,000 $ 0 0 95 279 6 76,000 Fresh Produce $ 0 0 %

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 SFS estimates that store support expenses, in total, are approximately 14% 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) Order processing (number of purchase orders) Receiving (number of deliveries) $ Frozen Foods Baked Goods Fresh Produce 267,000 $ 438,000 $ 473,000 249,000 354,000 365,000 Shelf-stocking (number of hours per delivery) Customer support (total units sold) Order processing Receiving Shelf-stocking Customer support The controller estimates activity-cost rates for each activity as follows: Required 1. Required 2 $ Sales Cost of goods sold Gross margin Store support: Total store support cost Operating income (loss) Operating margin (loss) 96 per purchase order 123 per delivery 29.00 per hour 0.19 per item 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. Frozen Foods Baked Goods Fresh Produce 10 57 14 73 4 33,000 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. 0.2134 should be entered as 21.34%). Round all other answers to nearest whole dollar.) $ $ Frozen Food 267,000 249,000 18,000 0 % Baked Goods 0.1 38,000 $ 0 0 95 279 6 76,000 Fresh Produce $ 0 0 %

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: Sales Cost of goods sold SFS estimates that store support expenses, in total, are approximately 14% 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: $ Frozen Foods 267,000 249,000 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) Order processing Receiving Shelf-stocking Customer support The controller estimates activity-cost rates for each activity as follows: Required 1 Required 2 Baked Goods Fresh Produce $ 438,000 $ 354,000 473,000 365,000 $ Sales Cost of goods sold Gross margin Store support: Total store support cost Operating income (loss) Operating margin (loss) 96 per purchase order 123 per delivery 29.00 per hour 0.19 per item 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. Frozen Foods Baked Goods Fresh Produce 10 57 14 73 4 0.1 33,000 38,000 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. 0.2134 should be entered as 21.34%). Round all other answers to nearest whole dollar.) $ Frozen Food 267,000 249,000 18,000 $ 0 % Baked Goods $ < Required 1 0 0 % 95 279 6 76,000 Fresh Produce $ Required 2 0 0 %
Transcribed Image Text: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 SFS estimates that store support expenses, in total, are approximately 14% 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: $ Frozen Foods 267,000 249,000 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) Order processing Receiving Shelf-stocking Customer support The controller estimates activity-cost rates for each activity as follows: Required 1 Required 2 Baked Goods Fresh Produce $ 438,000 $ 354,000 473,000 365,000 $ Sales Cost of goods sold Gross margin Store support: Total store support cost Operating income (loss) Operating margin (loss) 96 per purchase order 123 per delivery 29.00 per hour 0.19 per item 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. Frozen Foods Baked Goods Fresh Produce 10 57 14 73 4 0.1 33,000 38,000 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. 0.2134 should be entered as 21.34%). Round all other answers to nearest whole dollar.) $ Frozen Food 267,000 249,000 18,000 $ 0 % Baked Goods $ < Required 1 0 0 % 95 279 6 76,000 Fresh Produce $ Required 2 0 0 %
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