Question
Tristan Industries, Inc., makes heavy duty shock absorbers designed for off-road vehicles. The companys ABC costing system has four cost pools, which are listed below
Tristan Industries, Inc., makes heavy duty shock absorbers designed for off-road vehicles.
The companys ABC costing system has four cost pools, which are listed below with their activity measures and activity rates:
Activity Cost Pool | Activity Measure | Activity Rate | ||
Supporting direct labor | Number of direct labor-hours | $ | 10 | per direct labor-hour |
Batch processing | Number of batches | $ | 96 | per batch |
Order processing | Number of orders | $ | 271 | per order |
Customer service | Number of customers | $ | 2,623 | per customer |
The company just completed a single order from Trail Blazers Company for 2,600 shock absorbers.
The order was produced in three batches. Each shock absorber required 0.7 direct labor-hours.
The selling price was $141.60 per unit, the direct materials cost was $107 per unit, and the direct labor cost was $14.80 per unit.
This was Trail Blazers only order during the year.
Required:
Calculate the customer margin on sales to Trail Blazers for the year.
Part 2.
Assume a company is preparing a budget for its first two months of operations.
During the first and second months it expects cash sales of $36,500 and $40,500, respectively.
It also expects credit sales of $56,500 and $66,500, respectively.
The company expects to collect 30% of its credit sales in the month of the sale, 60% in the following month, and 10% is deemed uncollectible.
What amount of cash collections would appear in the companys cash budget for the second month?
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