Question
Exercise 7-11 Second-Stage Allocation and Margin Calculations [LO7-4, LO7-5] Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The companys activity-based
Exercise 7-11 Second-Stage Allocation and Margin Calculations [LO7-4, LO7-5]
Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The companys activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates:
Activity Cost Pool | Activity Measure | Activity Rate | ||
Supporting direct labor | Number of direct labor-hours | $ | 14 | per direct labor-hour |
Batch processing | Number of batches | $ | 93 | per batch |
Order processing | Number of orders | $ | 289 | per order |
Customer service | Number of customers | $ | 2,605 | per customer |
The company just completed a single order from Interstate Trucking for 1,900 custom seat cushions. The order was produced in four batches. Each seat cushion required 0.6 direct labor-hours. The selling price was $141.90 per unit, the direct materials cost was $112 per unit, and the direct labor cost was $15.00 per unit. This was Interstate Truckings only order during the year.
Required:
Calculate the customer margin on sales to Interstate Trucking for the year.
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