Financial Statistics for Supermercados Morelos, McArthur:
Soft Drinks
Fresh Produce Packaged Foods
Revenues
$317,400.00
$840,240.00
$483,960.00
COGS
$240,000.00
$600,000.00
$360,000.00
Cost of bottles returned
$4,800.00
-
-
No of purchase orders placed
144.00
336.00
144.00
No of deliveries received
120.00
876.00
264.00
Hours of shelf stocking time
216.00
2,160.00
1,080.00
50,400.00
441,600.00
122,400.00
Items Sold
Here, only 3 product lines have been considered for ease of convenience.
Supermercados Morelos had the following data for 2022:
Activity
Description of
Activity
Bottle Returns
Returning empty
bottles to the store
Orders
Placing orders for
purchases
Delivery
Delivery and receipt
of merchandise
Shelf Stocking
Stocking of
merchandise on
store shelves and
ongoing restocking
Customer Support
Assistance provided
to customers,
including checkout
and bagging
Total Support (Overhead
Costs)
Cost allocation
base
Direct tracing for
$4,800.00 soft drink line
624 purchase
$62,400.00 orders
$100,800.00
1,260 deliveries
3,456 hours of shelf
stocking time
$69,120.00
614,400 items sold
$122,880.00
$360,000.00
Here, the assumption is that the store support costs, i.e., all costs other than the cost of
goods sold, are allocated to the product lines based on the COGS of each product line.
1. Traditional Costing:
Total store support (overhead costs) =
●
●
●
●
●
$360,000
Cost of bottles returned=
Cost of purchase orders=
Cost of deliveries=
Cost of shelf stocking=
Cost of customer support=
$4,800
$62,400
$100,800
$69,120
$ 122,800
Cost of goods sold=
● Cost of soft drinks=
● Cost of fresh produce=
● Cost of packaged foods=
$ 1,200,000
$240,000
$600,000
$360,000
Allocation rate for support (overhead costs)= $360,000/$1,200,000= 30%.
Supermercados Morelos Traditional Costing Approach:
Soft Drinks
Fresh Produce
Packaged Foods
Revenues
$317,400.00
$840,240.00
$483,960.00
COGS
$240,000.00
$600,000.00
$360,000.00
$72,000.00
$180,000.00
$108,000.00
$312,000.00
$780,000.00
$468,000.00
$5,400.00
$60,240.00
$15,960.00
1.70%
7.17%
3.30%
Total support (overhead) costs- 30% of
COGS
Total Costs
Operating Profits
Profit Margin (Operating
profit/revenue)
The highest profit margin is obtained from fresh produce.
Common activities conducted to produce cost objects:
Activity
Cost Hierarchy
2
Ordering
Batch level
Delivery
Batch level
Shelf Stocking
Output unit
level
Customer Support
Output unit
Total costs 3
Cost driver quantity Cost driver rate
4
5= 3-4
624 purchase
$62,400.00 orders
$100,800.00
1,260 deliveries
3,456 hours of
$69,520.00 shelf stocking time
$100 per
purchase order
$80 per
delivery
$20 per shelf
stocking hour
$122,880.00 614,400 items sold $0.20 per item
level
sold
Gh
2. ABC Costing:
Supermercados Morelos ABC Cost based Approach:
Soft Drinks
Packaged
foods
Fresh Produce
Revenues
$317,400.00
$480,240.00
$483,960.00
COGS
$240,000.00
$600,000.00
$360,000.00
Cost of bottles returned
$4,800.00
$0.00
$0.00
Ordering Costs (144, 136, 144) purchase orders
x $100
14,400.00
33,600.00
14,400.00
Delivery Costs (120, 876, 264) deliveries x $80
9,600.00
70,080.00
21,120.00
Shelf stocking costs (216, 2160, 1080)
shelf-stocking hours x $20
4,320.00
43,200.00
21,600.00
10,080.00
88,320.00
22,480.00
$283,200.00
$835,200.00
$441,600.00
$34,200.00
$5,040.00
$42,360.00
10.78%
0.60%
8.75%
Customer support costs (50400, 441600,
122400) items sold x $0.20
Total Costs
Operating profits
Profit margin (Operating profits/Revenue)
Profitability for Supermercados Morelos under Traditional and ABC Costing approach:
Traditional- Profit
margin
ABC- profit
margin
Traditional- operating
profit
ABC- operating
profit
Fresh Produce
7.17%
0.60%
$5,400.00
$34,200.00
Packaged food
3.30%
8.75%
$60,240.00
$5,040.00
Soft drinks
1.70%
10.78%
$15,960.00
$42,360.00
$81,600.00
$81,600.00
Total
Conclusions from the ABC Approach:
1. Soft drinks provide the highest profit margin and make the most operating profits.
2. Packaged foods provided the second-highest profit margin.Lowest operating profits.
Explore whether the packaged food market share is expandable.