Question

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	$	238,000		$	381,000		$	416,000
Cost of goods sold		221,000			308,000			321,000

SFS estimates that store support expenses, in total, are approximately 13% 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)		11			62			107
Receiving (number of deliveries)		13			75			254
Shelf-stocking (number of hours per delivery)		5			0.2			7
Customer support (total units sold)		27,000			38,000			76,000

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

Order processing	$	98	per purchase order
Receiving		112	per delivery
Shelf-stocking		20.00	per hour
Customer support		0.25	per item

Required:

2. Prepare a product-line profitability report for SFS using the ABC information the controller provides.

I've worked out most of the problem but I'm having trouble with the question marks, thanks!

	Frozen Food	Baked Goods	Fresh Produce
Sales	238,000	381,000	416,000
COGS	221,000	308,000	321,000
Gross Margin	17,000	73,000	95,000
Store Support:
Order Processing	1,078	6,076	10,486
Receiving	1,456	8,400	28,448
Shelf-Stocking	?	?	?
Customer Support	6,750	9,500	19,000
Total Store Support	9,384	23,980	58,074
Operating Income	?	?	?
Operating Margin	?	?	?

Answer 1

	Frozen Food	Baked Goods	Fresh Produce
Sales	238,000	381,000	416,000
COGS	221,000	308,000	321,000
Gross Margin	17,000	73,000	95,000
Store Support:
Order Processing	1,078	6,076	10,486
Receiving	1,456	8,400	28,448
Shelf-Stocking	100	4	140
Customer Support	6,750	9,500	19,000
Total Store Support	9,384	23,980	58,074
Operating Income	7,616	49,020	36,926
Operating Margin	3.20%	12.87%	8.88%
	Frozen Foods	Baked Goods	Fresh Produce
	No. of activity	Activity rate	OH Allocated	No. of activity	Activity rate	OH Allocated	No. of activity	Activity rate	OH Allocated
Order processing (number of purchase orders)	11	98	1078	62	98	6076	107	98	10486
Receiving (number of deliveries)	13	112	1456	75	112	8400	254	112	28448
Shelf-stocking (number of hours per delivery)	5	20	100	0.2	20	4	7	20	140
Customer support (total units sold)	27,000	0.25	6750	38,000	0.25	9500	76,000	0.25	19000