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 $ 2 per direct labour-hour Order processing $10 per order Customer service $51 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 Deluxe Model Model Number of cases 100 10 Number of orders 5 2 Direct labour-hours per case 0.25 0.40 Selling price per case 30 50 Direct materials cost per case 7 10 The company's direct labour rate is $10 per hour. Required: - -I. . Using the company's ABC system, compute the customer margin of Cell City
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