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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 Frozen Foods $ 135,000 119,000 Baked Goods $ 120,000 $8,000 Fresh Produce $ 184,000 128,000

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 $ 135,000 119,000 Baked Goods $ 120,000 $8,000 Fresh Produce $ 184,000 128,000

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: Order processing Receiving Shelf-stocking Customer support Frozen Foods $ 135,000 119,000 sales Cost of goods sold SFS estimates that store support expenses, In total, are approximately 17% 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: Baked Goods $ 120,000 88,000 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: $84 per purchase order 105 per delivery per hour per item Required 1 Required 2 12.00 0.27 Fresh Produce $ 184,000 128,000 Operating income (loss) Operating margin (loss) Frozen Foods 9 10 6 26,000 % 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. Complete this question by entering your answers in the tabs below. Baked Goods 47 59 0.1 32,000 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. 0.2134 should be entered as 21.34%).) Frozen Food Baked Goods Fresh Produce % Fresh Produce 104 132 8 64,000 %
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: Order processing Receiving Shelf-stocking Customer support Frozen Foods $ 135,000 119,000 sales Cost of goods sold SFS estimates that store support expenses, In total, are approximately 17% 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: Baked Goods $ 120,000 88,000 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: $84 per purchase order 105 per delivery per hour per item Required 1 Required 2 12.00 0.27 Fresh Produce $ 184,000 128,000 Operating income (loss) Operating margin (loss) Frozen Foods 9 10 6 26,000 % 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. Complete this question by entering your answers in the tabs below. Baked Goods 47 59 0.1 32,000 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. 0.2134 should be entered as 21.34%).) Frozen Food Baked Goods Fresh Produce % Fresh Produce 104 132 8 64,000 %
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