With the rise in carbon dioxide, a greenhouse gas, release in the environment, when fossil fuels are burned, Earth’s natural greenhouse effect is…

With the rise in carbon dioxide, a greenhouse gas, release in the environment, when fossil fuels are burned, Earth’s natural greenhouse effect is becoming too weak causing global warming. To contribute towards global environment for the betterment, various cars and scooters manufacturing companies are shifting their production towards electric vehicles (EVs) manufacturing. Companies are heavily investing in research, development and production of EVs. Olay Ltd. is also one the companies belonging to scooter manufacturing industry. Watching its rivalries shifting their production to EVs, the management of Olay Ltd. decided to take the advantage of this open opportunity. It had been only 4 years since the company started its production of EVs, but last year, the management of the company also decided to expand its product line to 3 variants of the scooter, viz., Olay EV Max, Olay EV Ultra and Olay EV Pro. The following information is provided for the current year from the books of Olay Ltd.: Olay EV Max Olay EV Ultra Olay EV Pro Average revenue per unit (₹) 84,975 1,15,500 2,17,800 Average cost of goods sold per unit (₹) 82,500 1,10,000 1,98,000 Last year, when the company initially expanded its product line, the sales were not much noticeable comparative to its earlier category of scooters. The company could only sold 528, 330 and 110 units of Olay EV Max, Olay EV Ultra and Olay EV Pro respectively against the order received of 616, 396 and 165 units respectively. However, with the increasing awareness about the EVs, more people started buying EVs and, during the current year, the company’s order and sales jumped to five times the last year. For earlier years, Olay Ltd. used gross margin percentage method to evaluate the relative profitability for all of its EVs. However, from current year, company plans to use activity based costing for analysing the profitability. The Activity analysis of Olay Ltd. is as under: Activity Area Cost-allocation base Customer purchase order processing Purchase orders by customers Line-item ordering Line-items per purchase order Store delivery Unit sold Cartons dispatched to stores Cartons dispatched to a store per Unit Shelf-stocking at customer store Hours of shelf-stocking All the support costs for the current year amounts to 66,23,760. These support costs are assigned to all the activity areas. The cost in each area and the quantity of the cost allocation basis used in that area are as follows: Activity Area Total costs (₹) Total Units of Cost-allocation base Line-item ordering 14,04,480 66,110 line items Cartons dispatched to store 16,72,000 3,39,240 cartons Shelf-stocking at customer store 2,25,280 2,904 hours The Customer purchase order processing costs - 17,60,000 along with the store delivery cost of 15,62,000. Some of the other information is also provided below: Olay EV Max Olay EV Ultra Olay EV Pro Average number of line items per order 10 12 14 Average number of cartons shipped per store unit 16 80 300 Average number of hours of shelf-stocking per store delivery 0.1 0.6 3 The company wants you to FIGURE OUT the following to ascertain which of the product line is more profitable: