Activity-Based Customer Costing

Limpio Company produces dishwashers for 36 retail outlets. Of the 36 retail outlets, 34 are small, separately owned appliance stores and two are large retail chains. The two large retailers buy 80% of the dishwashers produced. The 34 smaller customers purchase dishwashers in approximately equal quantities, where the orders are about the same size. Data concerning Limpio's customer activity are as follows:

Large Retailer Smaller Retailers

Units purchased 60,000 15,000

Orders placed 20 1,500

Number of sales calls 8 816

Manufacturing costs $4,500,000 $1,125,000

Order filling costs allocated* $646,400 $161,600

Sales force costs allocated* $320,000 $80,000

Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.

Required:

Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.

Order filling rate per order

Selling call rate per sales call

Cost assignment:

Large retailer

Smaller retailers