Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 9

Product Line Profitability Analysis Studemeir Paint Floors (SPF) has experienced net operating losses in its Other Flooring Products line during the last few periods. SPF's management team thinks that the store will improve its profitability if it discontinues the Other Flooring Products line. The operating results from the most recent period are:

SPF estimates that store support expenses are approximately 24% of revenues.
Harish Rana, SPF's controller, states that not every sales dollar requires or uses the same amount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows:

Harish estimates activity-cost rates for each activity as follows:

Required
1. Prepare a product-line profitability report for SPF under the current costing system.
2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.
3. What new insights does the ABC system in requirement 2 provide to SPF managers