Jyoti Mfg. Co. has decided to increase the size of the store. It wants the information about the probability of the individual product lines :…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
Jyoti Mfg. Co. has decided to increase the size of the store. It wants the information about the probability of the individual product lines : Lemon, Grapes and Papaya. It provides the following data for the 2025 for each product line: Particulars Lemon Grapes Papaya Revenues (₹) 79,350 2,10,060 1,20,990 Cost of goods sold (₹) 60,000 1,50,000 90,000 Cost of bottles returned (₹) 1,200 0 0 Number of purchase orders placed 36 84 36 Number of deliveries received 30 219 66 Hours of shelf stocking time 54 540 270 Items sold 12,600 1,10,400 30,600 Jyoti Mfg. Co. also provides the following information for the year 2025: Activity Description of Activity Total Costs (₹) Cost Allocation Basis Bottle returns Returning of empty bottles to the store 1,200 Direct tracing to product line Ordering Placing of orders of purchases 15,600 156 purchase orders Delivery Physical delivery and the receipts of merchandise 25,200 315 deliveries Self-stocking Stocking of merchandise on store shelves and ongoing restocking 17,280 864 hours of time Customer support Assistance provided to customers including bagging and checkout 30,720 1,53,600 items sold Required (i) Jyoti Mfg. Co. currently allocates store support costs (all costs other than the cost of goods sold) to the product line on the basis of the cost of goods sold of each product line. CALCULATE the operating income and operating income as the percentage of revenue of each product line. (ii) If Jyoti Mfg. Co. allocates store support costs (all costs other than the cost of goods sold) to the product lines on the basis of ABC system, CALCULATE the operating income and operating income as the percentage of revenue of each product line.

Suggested Answer and Working Notes:

(i) Absorption Costing System Operating Income - Particulars Lemon Grapes Papaya Total Revenue 79,350 2,10,060 1,20,990 4,10,400 Less: Cost of Goods Sold 60,000 1,50,000 90,000 3,00,000 Less: Store Support Cost (2:5:3) 18,000 45,000 27,000 90,000 Operating Income 1,350 15,060 3,990 20,400 Operating Income (%) 1.70 7.17 3.30 4.97 (ii) ABC System Overhead Allocation Rate - Activity Total Costs (₹) Quantity of Cost Allocation Base Overhead Allocation Rate (₹) Ordering 15,600 156 Purchase Orders 100.00 Delivery 25,200 315 Delivering Orders 80.00 Shelf Stocking 17,280 864 Self Stocking Hours 20.00 Customer Support 30,720 1,53,600 Items Sold 0.20 Store Support Cost - Particulars Cost Driver Lemon Grapes Papaya Total Bottle Returns Direct 1,200 0 0 1,200 Ordering Purchase Orders 3,600 8,400 3,600 15,600 Delivery Deliveries 2,400 17,520 5,280 25,200 Self -Stocking Hours of time 1,080 10,800 5,400 17,280 Customer Support Items Sold 2,520 22,080 6,120 30,720 Grand Total 10,800 58,800 20,400 90,000 Operating Income - Particulars Lemon Grapes Papaya Total Revenue 79,350 2,10,060 1,20,990 410,400 Less: Cost of Goods Sold 60,000 1,50,000 90,000 300,000 Less: Store Support Cost 10,800 58,800 20,400 90,000 Operating Income 8,550 1,260 10,590 20,400 Operating Income (%) 10.78 0.60 8.75 4.97

Topics: Activity Based Costing

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