Activity-based budgeting. The Chelsea store of Family Supermarket (FS), a chain of small neighborhood grocery stores, is preparing its activity-based budget for January 2011. FS has three product categories: soft drinks, fresh produce, and packaged food. The following table shows the four activities that consume indirect resources at the Chelsea store, the cost drivers and their rates, and the cost-driver amount budgeted to be consumed by each activity in January 2011.

Â	Â	January 2011	January 2011 Budgeted
Â	Â	Budgeted	Amount of Cost Driver Used
Activity	Cost Driver	Cost-Driver Rate	Soft Drinks	Fresh Produce	Packaged Food
Ordering	Number of purchase orders	0.18	14	24	14
Delivery	Number of deliveries	$90	12	62	19
Shelf stocking	Hours of stocking time	$82	16	172	94
Customer support	Number of items sold	$21	4,600	34,200	10,750

1. What is the total budgeted indirect cost at the Chelsea store in January 2011? What is the total budgeted cost of each activity at the Chelsea store for January 2011? What is the budgeted indirect cost of each product category for January 2011?

2. Which product category has the largest fraction of total budgeted indirect costs?

3. Given your answer in requirement 2, what advantage does FS gain by using an activity-based approach to budgeting over, say, allocating indirect costs to products based on cost of goods sold?