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Activity-Based Customer Costing Dormirbien Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one

Activity-Based Customer Costing Dormirbien Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Dormirbien's customer activity are as follows:

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Required:

Assign costs to customers by using an ABC approach. Round activity rates to at least three decimals and round activity costs to the nearest dollar.

Order filling rate $ per order
Selling call rate $ per sales call
Cost assignment:
Large retailer $
Smaller retailers
Large RetailerSmaller Retailers Units purchased Orders placed Number of sales calls Manufacturing costs Order filling costs allocated* Sales force costs allocated* 36,000 12 6 $14,400,000 $484,800 $240,000 24,000 1,200 294 $9,600,000 $323,200 160,000 Currently allocated on sales volume (units sold) Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver

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