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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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