Foam Products, Inc., makes foam seat cushions for the automotive and aerospace i
ID: 2409540 • Letter: F
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 Activity Rate Number of direct labor-hours Number of batches Number of orders Number of customers 12 per direct labor-hour $ 95 per batch $273 per order $2,638 per customer The company just completed a single order from Interstate Trucking for 2,600 custom seat cushions. The order was produced in four batches. Each seat cushion required 0.4 direct labor-hours. The selling price was $141.60 per unit, the direct materials cost was $107 per unit, and the direct labor cost was $14.20 per unit. This was Interstate Trucking's only order during the year Required Calculate the customer margin on sales to Interstate Trucking for the yearExplanation / Answer
Solution: Interstate Trucking Customer Margin -ABC Analysis Sales 368,160 Costs: Direct materials 278,200 Direct labor 36,920 Supporting direct labor 12,480 Batch processing 380 Order processing 273 Customer service overhead 2638 330,891 Customer margin 37,269 Working Notes: Interstate Trucking Customer Margin -ABC Analysis Sales 368,160 a (2,600 seats × $141.60 per seat) Costs: Direct materials 278,200 b ($107 per seat × 2,600 seats) Direct labor 36,920 c ($14.20 per seat × 2,600 seats) Supporting direct labor 12,480 d ($12 per DLH × 0.4 DLH per seat × 2,600 seats) Batch processing 380 e ($95 per batch × 4 batches) Order processing 273 f ($273 per order × 1 order) Customer service overhead 2638 g ($2,638 per customer × 1 customer) 330,891 h=b+c+d+e+f+g Customer margin 37,269 i=a-h Please feel free to ask if anything about above solution in comment section of the question.