Harry Super Store Products Analysis Assignment Help With Solution
Harry Super-Store (HS) operates at capacity and decides to apply ABC analysis to three product lines: food, home utensils and lifestyle products. It identifies four activities and their activity cost rates as follows:
|Ordering||$51 per purchase order|
|Delivery and receipt of merchandise||$39 per delivery|
|Shelf-stocking||$42 per hour|
|Customer support and assistance||$0.22 per item sold|
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:
|Food||Home utensils||Lifestyle products|
|Cost of goods sold||$36,000||$48,000||$34,000|
|Activity-area usage (cost-allocation base)|
|Ordering (purchase orders)||50||40||30|
|Customer support (items sold)||13,500||17,500||8,000|
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Under its simple costing system, HS allocated support costs to products at the rate of 30% of cost of goods sold.
a.Use the simple costing system to prepare a product-line profitability report for HS.
b.Use the ABC system to prepare a product-line profitability report for HS.
c.What new insights does the ABC system in requirement (b) provide to HS managers?
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