Family Supermarket (FS) has decided to increase the size of its Memphis store.

It wants information about the profitability of individual product lines: soft drinks, fresh produce, and packaged food. FS provides the following data for the year 2009 for each product line: Soft drinks Revenues COGS Cost of bottles returned Number of purchase orders placed Number of deliveries received Hrs of shelf-stocking time Items sold $317,400 240,000 4,800 144 120 216 50,400 Fresh produce $840,240 600,000 0 336 876 2,160 441,600 Packaged food $483,960 360,000 0 144 264 1,080 122,400

FS also provides the following information for the year 2009: Activity (1) Bottle returns Ordering Delivery Shelfstocking Customer support Required: 1. FS currently allocates store support costs (all costs other than COGS) to product lines on the basis of COGS of each product line. Calculate the operating income and operating income as a percentage of revenue for each product line. If FS allocates store support costs (all costs other than COGS) to product lines on the basis of ABC, calculate the operating income and operating income as a percentage of revenue for each product line. Description of activity (2) Returning of empty bottle to store Placing of orders for purchases Physical delivery and receipt of merchandise Stocking of merchandise on store shelves and ongoing restocking Assistance provided to customers, including checkout and bagging Total costs (3) 4,800 62,400 100,800 69,120 122,880 Cost-allocation base (4) Direct tracing to soft-drink line 624 purchase orders 1,260 deliveries 3,456 hrs of stoking time 614,400 items sold

2.