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Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the

Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models:

Activity Cost Pool Activity Rates
Supporting manufacturing $ 3 per direct labour-hour
Order processing $ 15 per order
Customer service $ 50 per customer

Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months:

Standard Model Deluxe Model
Number of cases 120 35
Number of orders 5 2
Direct labour-hours per case 0.20 0.40
Selling price per case $ 35 $ 55
Direct materials cost per case $ 10 $ 12

The companys direct labour rate is $19 per hour.

Required:

Using the companys ABC system, compute the customer margin of Cell City.

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