Foam Products, Inc., makes foam seat cushions for the automotive and aerospace i
ID: 2547745 • 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:
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 0.4 direct labor-hours. The selling price was $142.00 per unit, the direct materials cost was $109 per unit, and the direct labor cost was $14.70 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 $ 10 per direct labor-hour Batch processing Number of batches $ 99 per batch Order processing Number of orders $ 290 per order Customer service Number of customers $ 2,613 per customerExplanation / Answer
Sales revenue (2300*142) 3,26,600
Less:Direct Materials (2300*109) 2,50,700
Less: Direct labor cost (2300*14.70) 33,810
Less: Batch processing cost (99*4) 396
Less:Supporting direct labor (0.4*2300*10) 9,200
Less: Order processing (1*290) 290
Less: Customer sservice cost (1*2613) 2,613
Net customer margin 29,591
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