Customer Profitability Analysis: Traditional vs$.$ ABC Costing

Harrisburg Hershey

Customer Information Construction Builders

Revenue $17,25020,300$

Direct materials cost $4,4004,750$

Direct labor cost $2,1501,850$

Shipping cost $255390$

Units shipped $80137$

Setups $31$

Inspections $32$

Orders $42$

Product designs $42$

Machine hours $140215$

Cost Pool CDR Cost Driver

Total budgeted overhead $$18\mathrm{.}63$ Per machine hour

Machine Setups $$1,377\mathrm{.}35$ Setups

Quality Control $$514\mathrm{.}59$ Inspections

Customer Orders $$597\mathrm{.}30$ Orders

Product Designs $$1,035\mathrm{.}88$ Designs

Customer Relations $$1,155\mathrm{.}00$ Customers NOTE: CUSTOMER RELATIONS CDR

Other $$4\mathrm{.}67$ Machine Hours APPLIES ONCE PER CUSTOMER

TRADITIONAL COSTING METHOD Harrisburg Hershey

Margin Calculation Construction Builders

Sales $$17,250$ $$20,300$

Direct materials $$4,4004,750$

Direct labor $2,1501,850$

Overhead applied

Gross Margin $$17,250$ $$20,300$

$100\mathrm{.}0\%100\mathrm{.}0\%$

Check figures: $46\mathrm{.}9\%47\mathrm{.}8\%$

Harrisburg Hershey

ABC MARGIN ANALYSIS Construction Builders

Sales $$17,250\mathrm{.}00$ $$20,300\mathrm{.}00$

Direct materials $$4,400\mathrm{.}00$ $$4,750\mathrm{.}00$

Direct labor $2,150\mathrm{.}001,850\mathrm{.}00$

Shipping $255\mathrm{.}00390\mathrm{.}00$

Machine Setups $1,377\mathrm{.}35$

Quality Control

Customer Orders

Product Designs

Customer Relations

Other

ABC Customer Margin

$0\mathrm{.}0\%0\mathrm{.}0\%$

Check figures: $-20\mathrm{.}7\%27\mathrm{.}0\%$