Question

Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company’s activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates:

Activity Cost Pool	Activity Measure	Activity Rate
Supporting direct labor	Number of direct labor-hours	$	12	per direct labor-hour
Batch processing	Number of batches	$	87	per batch
Order processing	Number of orders	$	283	per order
Customer service	Number of customers	$	2,616	per customer

The company just completed a single order from Interstate Trucking for 2,700 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.5 direct labor-hours. The selling price was $141.80 per unit, the direct materials cost was $107 per unit, and the direct labor cost was $13.50 per unit. This was Interstate Trucking’s only order during the year.

Required:

Calculate the customer margin on sales to Interstate Trucking for the year.

Answer 1

	Sales(2,700*$141.80)	$3,82,860
Less:	Direct materials(2,700*$107)	$2,88,900
Less:	Direct labor cost(2,700*$13.50)	$36,450
Less:	Supporting direct labor(2,700*0.50 hrs*$12)	$16,200
Less:	Batch processing(2 batches*$87)	$174
Less:	Order processing($283*1 order)	$283
Less:	Customer Service(2,616*1 customer)	$2,616
	Margin on sales	$38,237