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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:

Frozen FoodsBaked GoodsFresh ProduceSales$ 120,000$ 91,000$ 158,175Cost of goods sold105,00067,000110,000

SFS estimates that store support expenses, in total, are approximately 20% 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 FoodsBaked GoodsFresh ProduceOrder processing (number of purchase orders)1045100Receiving (number of deliveries)1255120Shelf-stocking (number of hours per delivery)20.54Customer support (total units sold)30,00040,00086,000

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

Order processing$ 80per purchase orderReceiving110per deliveryShelf-stocking15.25per hourCustomer support0.21per 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.

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