Activity-Based Customer Costing

Sleepeze 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 Sleepeze's customer activity are as follows:

Large Retailer Smaller Retailers

Units purchased 108,000 72,000

Orders placed 36 3,600

Number of sales calls 18 882

Manufacturing costs $43,200,000 $28,800,000

Order filling costs allocated* $1,472,580 $981,720

Sales force costs allocated* $783,000 $522,000

*Currently allocated on sales volume (units sold).

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$