Management would like an analysis of the profitability of a particular customer,

Question

Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months:

The company’s direct labor rate is $18 per hour.

Required:

Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.)

Activity Cost Pool Activity Rate Supporting direct labor $ 18 per direct labor-hour Order processing $ 188 per order Custom design processing $ 270 per custom design Customer service $ 436 per customer

Explanation / Answer

Revenue 30140 =(1700*15)+(2320*2) Expenses: Direct materials cost 7782 =(442*15)+(576*2) Direct labor cost 8883 =(15*28.5*18)+(2*33*18) Supporting direct labor 8883 =(15*28.5*18)+(2*33*18) Order processing 752 =(188*2)+(188*2) Custom design processing 540 =270*2 Customer service 436 Total expenses 27276 Customer margin 2864

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