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 $ 14 per direct labor-hour Batch processing Number of batches $ 92 per batch Order processing Number of orders $ 275 per order Customer service Number of customers $ 2,632 per customer The company just completed a single order from Interstate Trucking for 1,900 custom seat cushions. The order was produced in three batches. Each seat cushion required 0.6 direct labor-hours. The selling price was $141.60 per unit, the direct materials cost was $109 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 yea

Answer 1

Answer:-

Interstate Trucking
Customer-Margin
ABC Analysis
Particulars		Amount
		$
Sales		269040
Less:- Costs
Direct Material		207100
Direct Labor		27740
Supporting Direct Labor		15960
Batch processing		368
Order processing		275
Customer processing overhead		2632
Customer Margin		14965

Explanation:-Sales =(1900 seats*141.60 per seat) =$269040

Direct Material =(109 per seat*1900 seats) = $207100

Direct labor costs =(14.60 per seat*1900 seats) = $27740

Supporting direct labor ($14 per DLH *0.6 DLH per seat *1900 seats) = $15960

Batch processing ($92 per batch*4 batches) = $368

Order processing ($275 per order*1 order) = $275

Customer service overhead ($2632 per customer*1 customer) = $2632