Question
Orozco Enterprises makes a variety of products that it sells to other businesses. The companys activity-based costing system has four activity cost pools for assigning
Orozco Enterprises 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 activity-based costing 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. Ellyson Corporation buys only one of the companys products. The details of last years purchases of this product are listed below:
Number of units purchased | 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: What is the customer margin on sales to Ellyson Corporation for the year?
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