Question
DelauderEnterprises makes a variety of products that it sells to other businesses. The companys activity-based costing system has four activity cost pools for assigning costs
DelauderEnterprises makes a variety of products that it sells to other businesses. The companys activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below:
Activity Cost Pool | Activity Measure | Activity Rate | ||
Supporting assembly | Direct labor-hours (DLHs) | $ | 3.45 | per DLH |
Processing batches | Number of batches | $ | 193.30 | per batch |
Processing orders | Number of orders | $ | 83.05 | per order |
Serving customers | Number of customers | $ | 1,608.00 | per customer |
The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the companys products. The details of last years purchases of this product are listed below:
Number of units purchased | 1,500 | units | |
Number of batches | 5 | batches | |
Number of orders | 2 | orders | |
Direct labor-hour requirement | 0.25 | DLHs per unit | |
Selling price | $ | 18.55 | per unit |
Direct materials cost | $ | 8.35 | per unit |
Direct labor cost | $ | 3.95 | per unit |
According to the ABC system, the customer margin for this customer this past year was closest to:
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