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	$	9	per direct labor-hour
Batch processing	Number of batches	$	89	per batch
Order processing	Number of orders	$	282	per order
Customer service	Number of customers	$	2,623	per customer

 

The company just completed a single order from Interstate Trucking for 2,100 custom seat cushions. The order was produced in five batches. Each seat cushion required 0.4 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 $13.70 per unit. This was Interstate Trucking’s only order during the year.

 

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

Interstate Trucking

Customer Margin- ABC Analysis

Costs:
Customer margin

Answer 1

Calculation of customer margin on sales to Interstate Trucking for the year: