Ans. | Interstate Trucking | |||
Customer Margin - ABC Analysis | ||||
Particulars | Amount | Amount | ||
Sales (A) | $269,420 | |||
Less: Costs: | ||||
Direct materials | $193,800 | |||
Direct labor | $27,930 | |||
Supporting direct labor | $17,100 | |||
Batch processing | $285 | |||
Order processing | $275 | |||
Customer service | $2,619 | |||
Total Costs (B) | $242,009 | |||
Customer Margin (A - B) | $27,411 | |||
Customer margin percentage = Customer margin / Sales * 100 | ||||
$27,411 / $269,420 * 100 | ||||
10.17% | ||||
*WORKING NOTES: | ||||
Sales = Selling price per unit * Number of custom seat cushions | ||||
$141.80 * 1,900 = $269,420 | ||||
Direct materials = Direct materials per unit * Number of custom seat cushions | ||||
$102 * 1,900 = $193,800 | ||||
Direct labor = Direct labor per unit * Number of custom seat cushions | ||||
$14.70 * 1,900 = $27,930 | ||||
Supporting direct labor is based on direct labor hours, we have given the direct labor hours per unit, | ||||
so we need to calculate the total direct labor hours. | ||||
Total direct labor hours = Direct labor hours per unit * Number of units | ||||
0.6 * 1,900 = 1,140 hours | ||||
Supporting direct labor = Total direct labor hours * Direct labor rate | ||||
1,140 * $15 = $17,100 | ||||
Batch processing = Number of batches * Rate per batch | ||||
3 * $95 = $285 | ||||
Order processing = Rate per order * Number of orders | ||||
$275 * 1 = $275 | ||||
Customer service = Number of customers * Rate per customer | ||||
1 * $2,619 = $2,619 | ||||
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