Question

Exercise 7-14 Second-Stage Allocation and Margin Calculations (LO3, LO4) Roll Board Inc. manufactures several models of high-quality skateboards. The company's ABC system has four activity cost pools, which are listed below along with their activity measures and activity rates: Activity Cost Pool Supporting direct labour Batch processing Order processing Customer service Activity Measure Number of direct labour-hours Number of batches Number of orders Number of customers Activity Rate $ 12 per direct labour-hour $ 90 per batch $ 171 per order $1,300 per customer The company just completed a single order from SkateCo for 3,650 entry-level skateboards. The order was produced in 31 batches. Each skateboard required 0.6 direct labour-hours. The selling price was $125 per skateboard, the direct materials cost was $78.40 per skateboard, and the direct labour cost was $18.30 per skateboard. This was the only order from SkateCo for the year. Required: Prepare a report showing the customer margin on sales to SkateCo for the year. Sales Costs: Direct materials Direct labour Supporting direct labour Batch processing Order processing Customer service overhead Customer margin

Answer 1

Sales ($125 X 3,650)		$456,250
Costs :		($383,496)
Direct materials ($78.40 X 3,650)	$286,160
Direct labour ($18.30 X 3,650)	$66,795
Supporting direct labour {(0.6 X 3,650)DLH X $12}	$26,280
Batch processing (31 X 3,650)	$2,790
Order processing (only one order)	$171
Customer service overhead (one customer only)	$1,300
Customer margin		$72,754