Question
Hojoco Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning
Hojoco Enterprises makes a variety of products that it sells to other businesses. The company's 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) | $5.20 | per DLH |
| Processing batches | Number of batches | $107.55 | per batch |
| Processing orders | Number of orders | $88.75 | per order |
| Serving customers | Number of customers | $1,793.00 | per customer |
The cost of serving customers, $1,793.00 per customer, is the cost of serving a customer for one year. Rolf Corporation buys only one of the company's products. The details of last year's purchases of this product are listed below:
| Number of units sold to Rolf | 900 | units |
| Number of batches | 8 | batches |
| Number of orders | 2 | orders |
| Direct labor-hour requirement | 0.25 | DLHs per unit |
| Selling price | $16.30 | per unit |
| Direct materials cost | $6.60 | per unit |
| Direct labor cost | $5.00 | per unit |
Required:
How much is the customer margin on sales to Rolf Corporation for the year?
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