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	$	11	per direct labor-hour
Batch processing	Number of batches	$	93	per batch
Order processing	Number of orders	$	287	per order
Customer service	Number of customers	$	2,607	per customer

The company just completed a single order from Interstate Trucking for 1,800 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.4 direct labor-hours. The selling price was $142.40 per unit, the direct materials cost was $103 per unit, and the direct labor cost was $14.10 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.

Interstate Trucking
Customer Margin—ABC Analysis
Costs:
Direct labor
Direct materials
Supporting direct labor
Batch processing
Order processing
Customer service overhead
		0
Customer margin		$0

Answer 1

Answer-

INTERSTATE TRUCKING
CUSTOMER MARGIN (ABC ANALYSIS)
PARTICULARS		AMOUNT
		$
Sales (a)	1800 units*$142.40 per unit	256320
Less:- Costs
Direct material	1800 units*103 per unit	185400
Direct labor	1800 units*14.10 per unit	25380
Supporting direct labor	(1800 units*0.4 DLHs per unit)*$11 per DLHs	7920
Batch processing	$93 per batch*2 batches	186
Order processing cost	$287 per order*1 order	287
Customer service cost	$2607 per customer*1 customer	2607
Total costs (b)		221780
Customer margin (c=a-b)		34540