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:

The company just completed a single order from Interstate Trucking for 2,300 custom seat cushions. The order was produced in four batches. Each seat cushion required 0.8 direct labor-hours. The selling price was $141.10 per unit, the direct materials cost was $112 per unit, and the direct labor cost was $14.60 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.

Activity Cost Pool Activity Measure Activity Rate Supporting direct labor Number of direct labor-hours $ 11 per direct labor-hour Batch processing Number of batches $ 90 per batch Order processing Number of orders $ 273 per order Customer service Number of customers $ 2,617 per customer

Explanation / Answer

Sales 324530 =2300*141.1 Less: Direct materials cost 257600 =2300*112 Direct labor cost 33580 =2300*14.6 Supporting direct labor 20240 =2300*0.8*11 Batch processing 360 =90*4 Order processing 273 Customer service 2617 314670 Customer margin 9860

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