Cumberland Enterprises makes a variety of products that it sells to other busine

Question

Cumberland 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 Supporting assembly Processing batches Processing orders Serving customers Activity Measure Direct labor-hours (DLHs)5.65 per DLH Number of batches Number of orders Number of customers Activity Rate $146.65 per batch $80.05 per order $2,663.00 per customer The cost of serving customers, $2,663.00 per customer, is the cost of serving a customer for one year. Steckman Corporation buys only one of the company's products which Cumberland Enterprises sells for $22.05 per unit. Last year Steckman Corporation ordered a total of 1,200 units of this product in 4 orders. To fill the orders, 8batches were required. The direct materials cost is $7.65 per unit and the direct labor cost is $5.20 per unit. Each unit requires 0.30 DLHs. According to the ABC system, the customer margin for this customer this past year was closest to:

Explanation / Answer

Answer is $ 4849.60 Explanation: Customer Margin: Sales revenue (1200 units @ 22.05) 26460 Less:Cost Material (1200*7.65) 9180 Labour (1200*5.20) 6240 Activity cost Supporting assembly (1200*0.30*5.65) 2034 Processing batches (8 batch @ 146.65) 1173.2 Processing order (4 orders @ 80.05) 320.2 Serving customer (@ 2663) 2663 Customer Margin: 4849.6

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