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	$	96	per batch
Order processing	Number of orders	$	275	per order
Customer service	Number of customers	$	2,601	per customer

The company just completed a single order from Interstate Trucking for 2,800 custom seat cushions. The order was produced in five batches. Each seat cushion required 0.8 direct labor-hours. The selling price was $141.70 per unit, the direct materials cost was $108 per unit, and the direct labor cost was $14.30 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.

Answer 1