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 Supporting direct labor Batch processing Order processing Customer service Activity Measure Number of direct labor-hours Number of batches Number of orders Number of customers $ $ $ $ Activity Rate 8 per direct labor-hour 85 per batch 273 per order 2,629 per customer The company just completed a single order from Interstate Trucking for 2,000 custom seat cushions. The order was produced in four batches. Each seat cushion required 0.6 direct labor-hours. The selling price was $142.20 per unit, the direct materials cost was $110 per unit, and the direct labor cost was $14.70 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. Interstate Trucking Customer Margin-ABC Analysis Costs: Customer margin

Answer 1

Customer Margin - ABC Analysis
Sales (2000*142.20)		$284,400
Costs:
Direct materials (2000*110)	$220000
Direct Labor (2000*14.70)	29400
Supporting Direct Labor (8*0.6*2000)	9600
Batch processing (85*4)	336
Order processing	273
Customer service overhead	2629	262238
Customer Margin		$22,162