ChispyChip Ltd. manufactures 3 types of packed chips namely Crunchy Potato, Crispy Corn and Crumbly Banana and offers to sell them at wholesale…

Working notes: Total support cost: Particulars Amount (₹) Placing of orders 17,94,000 Physical delivery of goods 28,98,000 Stocking of goods on store shelves 19,87,200 Supervising cost 13,80,000 Quality Inspections 9,03,900 Total 89,63,100 Percentage of support cost to cost of goods sold (COGS): = Total support cost / Total cost of goods sold × 100 = (₹ 89,63,100 /3,58,52,400) × 100 = 25% Cost for each activity cost driver: Activity Total cost (₹) Cost allocation base Cost driver rate Placing of orders 17,94,000 1,127 + 1,242 + 1,219 = 3,588 purchase orders 500 per purchase order Physical delivery of goods 28,98,000 2,185 + 2,668 + 2,392 = 7,245 deliveries 400 per delivery Stocking of goods on store shelves 19,87,200 6,072 + 7,130 + 6,670 = 19,872 hours of shelf-stocking 100 per stocking hour Supervising cost 13,80,000 19,159 + 19,435 + 18,906 = 57,500 direct labour hour 24 per direct labour hour Quality Inspections 9,03,900 759 + 782 + (736 x 2*) = 3,013 inspections 300 per inspection * As the inspection duration for Crumbly Banana Chips is double, its base would be doubled to calculate cost driver rate under Activity Based Costing. (i) Statement of Operating income and its percentage of revenues for each product line (When support costs are allocated to product lines on the basis of cost of goods sold of each product) Crunchy Potato (₹) Crispy corn (₹) Crumbly Banana (₹) Total (₹) Revenues: (A) 1,53,35,250 1,63,36,900 1,55,23,850 4,71,96,000 Cost of Goods sold (COGS): (B) 1,12,70,000 1,27,37,400 1,18,45,000 3,58,52,400 Support cost (25% of COGS): (C) (Refer working notes) 28,17,500 31,84,350 29,61,250 89,63,100 Total cost: (D) = {(B) + (C)} 1,40,87,500 1,59,21,750 1,48,06,250 4,48,15,500 Operating income: E= {(A)-(D)} 12,47,750 4,15,150 7,17,600 23,80,500 Operating income as a percentage of revenues: (E/A) × 100) 8.14% 2.54% 4.62% 5.04% (ii) Statement of Operating income and its percentage of revenues for each product line (When support costs are allocated to product lines using an activity-based costing system) Crunchy Potato (₹) Crispy corn (₹) Crumbly Banana (₹) Total (₹) Revenues: (A) 1,53,35,250 1,63,36,900 1,55,23,850 4,71,96,000 Cost & Goods sold 1,12,70,000 1,27,37,400 1,18,45,000 3,58,52,400 Placing of orders 5,63,500 (1,127 x 500) 6,21,000 (1,242 x 500) 6,09,500 (1,219 x 500) 17,94,000 Physical delivery of goods 8,74,000 (2,185 x 400) 10,67,200 (2,668 x 400) 9,56,800 (2,392 x 400) 28,98,000 Stocking of goods on store shelves 6,07,200 (6,072 x 100) 7,13,000 (7,130 x 100) 6,67,000 (6,670 x 100) 19,87,200 Supervising cost 4,59,816 (19,159 x 24) 4,66,440 (19,435 x 24) 4,53,744 (18,906 x 24) 13,80,000 Quality Inspections 2,27,700 (759 x 300) 2,34,600 (782 x 300) 4,41,600 (736 x 2 x 300) 9,03,900 Total cost: (B) 1,40,02,216 1,58,39,640 1,49,73,644 4,48,15,500 Operating income C:{(A)-(B)} 13,33,034 4,97,260 5,50,206 23,80,500 Operating income as a percentage of revenues: (C/A) × 100) 8.69% 3.04% 3.54% 5.04%