Foam Products Inc makes foam seat cushions for the automotiv

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 Measure Activity Cost Pool Supporting direct labor Batch processing Order processing Customer service Activity Rate Number of direct labor-hours Number of batches Number of orders Number of customers $10 per direct labor-hour $95 per batch $ 279 per order 2,625 per customer The company just completed a single order from Interstate Trucking for 1,800 custom seat cushions. The order was produced in four batches. Each seat cushion required 0.4 direct labor-hours. The selling price was $141.90 per unit, the direct materials cost was $106 per unit, and the direct labor cost was $14.80 per unit. This was Interstate Trucking\'s only order during the year. Calculate the customer margin on sales to Interstate Trucking for the year. Interstate Trucking Customer Margin-ABC Analysis Costs: Customer margin

Solution

Customer Margin—ABC Analysis Sales 255420 =1800*141.9 Costs: Direct materials 190800 =1800*106 Direct labor 10656 =1800*0.4*14.8 Supporting direct labor 7200 =1800*0.4*10 Batch processing 380 =95*4 Order processing 279 Customer service overhead 2625 211940 Customer margin 43480