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2) Fitzgerald Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows: Ordering Delivery and receipt of merchandise Shell-stocking Customer support and assistance S45 per purchase order 576 per delivery $19 per hour $ 0.15 per ten 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: Baked Goods Milk and Fruit Juice Frozen Products Financial data Revenues S80,000 566,500 550.500 Cost of goods sold S41,000 $50,000 $32.000 Store support $12,300 S15.300 $ 9,500 Activity area usage cost-allocation base) Ordering purchase orders) 44 24 14 Delivery deliveries! 120 60 Shell-stocking hours 170 150 Customer support items sold) 15,400 20,200 2.960 Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold Required 1. Use the simple costing system to prepare a product-line profitability report for FS. (20 marks) 2. Use the ABC system to prepare a product-line profitability report for FS (20 marks) 3. What new insights does the ABC system in requirement 2 provide to FS managers? (10 marks) Total 50 marks

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