Question

shift b. Using the following information, set up a Customer Margin Report using Activity Based Costing to determine the profitability of the customer Customer A Sales $580,000 Direct Material Cost $230,000 Direct Labor Cost $150,000 Selling Cost $80,000 Direct matenal selling cost Setup cost 230000 80,000 51,445 150ooo 79915 (contnbution margin Direct labur $-11360 Inspection Looking back to your work above, specify the value for each of the following: 1) Total overhead assigned to the Inspection cost pooli 2) Allocation rate for the clean-up cost pool 3) Total clean-up overhead assigned to the customer 4) Total inspection overhead assigned to the customers 79915 5) Total direct costs traced to the customer

Answer 1

Working notes: Wages and salaries Factory supplies Clean-up 22% 48% Inspection 60% 20% Other 18% 32% Total 100% 100% Wages and salaries Factory supplies Total overheads Allocation Overhead Clean-up Inspection Other Total costs $806,000 $177,320 $483,600 $145,080 $806,000 $488,000 $234,240 $97,600 $156,160 $488,000 $1,294,000 $411,560 $581,200 $301,240 $1,294,000 Activity Activity Rate Overhead Costs $411,560 $581,200 Total Activities 1,000 400 Clean up Inspection $411.56 per batch $1,453.00 per inspection a Customer A Activity Total cost Activity consumed 125 55 Activity Rate $411.56 $1,453.00 clean up Inspection Total cost allocated $51,445 $79,915 $131,360 $580,000 b Customer Margin Report Sales Less: Cost of goods sold Direct material $230,000 Direct labor $150,000 Overhead costs $131,360 Cost of goods sold Gross profit Less: Operating expenses Selling cost Customer Margin-Profit (Loss) $511,360 $68,640 $80,000 $11,360 с 1) $581,200 2) $411.56 per batch 3) $51,445 4) $79,915 5) $591,360 Cost of goods sold + Selling expenses