Foam Products, Inc., makes foam seat cushions for the automotive and aerospace i

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 Measure Activity Rate Activity Cost Pool Supporting direct labor Batch processing Order processing Customer service Number of direct labor-hours Number of batches Number of orders Number of customers $9 per direct labor-hour $90 per batch $ 278 per order $ 2,615 per customer The company just completed a single order from Interstate Trucking for 1,700 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.8 direct labor-hours. The selling price was $142.00 per unit, the direct materials cost was $110 per unit, and the direct labor cost was $14.80 per unit. This was Interstate Trucking's only order during the year Required: Prepare a report showing the customer margin on sales to Interstate Trucking for the year. Interstate Trucking Customer Margin-ABC Analysis Costs: Customer margin

Explanation / Answer

Calculate customer margin :

Sales (1700*142) 241400 Costs : Direct material (1700*110) (187000) Direct labour (1700*14.80) (25160) Supporting labour cost (1700*.8*9) (12240) Batch processing cost (90*2) (180) Order processing cost (278*1) (278) Customer service (2615*1) (2615) Total cost (227473) Customer margin 13927

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