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	$	97	per batch
Order processing	Number of orders	$	287	per order
Customer service	Number of customers	$	2,636	per customer

The company just completed a single order from Interstate Trucking for 3,000 custom seat cushions. The order was produced in three batches. Each seat cushion required 0.6 direct labor-hours. The selling price was $142.30 per unit, the direct materials cost was $104 per unit, and the direct labor cost was $14.80 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

Calculate customer margin on sales

Sales (142.30*3000)	426900
Direct material (3000*104)	312000
Direct labor (3000*14.8)	44400
Supporting labor (3000*.6*9)	16200
Batch processing (97*3)	291
Order processing	287
Customer service	2636
Customer margin	51086