Question:

Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Cost Pool Activity Rates Supporting manufacturing $2 per direct labour-hour Order processing $22 per order Customer service $88 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Deluxe Model Model Number of cases 220 70 Number of orders Direct labour-hours per case 0. 25 0 . 40 Selling price per case 42 62 Direct materials cost per case 19 22 The company's direct labour rate is $22 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City. Sales Costs: Direct materials Direct labour Supporting manufacturing Order processing Customer service 0 Customer margin $ 0