ScholfieldEnterprises makes a variety of products that it sells to other busines
ID: 2593237 • Letter: S
Question
ScholfieldEnterprises 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:
The cost of serving customers, $1,191.00 per customer, is the cost of serving a customer for one year.
Latif Corporation buys only one of the company’s products which ScholfieldEnterprises sells for $15.60per unit. Last year Latif Corporation ordered a total of 1,100units of this product in 2orders. To fill the orders, 7batches were required. The direct materials cost is $7.85per unit and the direct labor cost is $1.90per unit.Each unit requires 0.10DLHs.
According to the ABC system, the customer margin for this customer this past year was closest to:
Multiple Choice
$14,175.90
$6,435.00
$3,450.90
$8,525.00
Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) $ 6.55 per DLH Processing batches Number of batches $ 138.20 per batch Processing orders Number of orders $ 52.60 per order Serving customers Number of customers $ 1,191.00 per customerExplanation / Answer
Particulars
Computation
Amount ($)
Sales
1100*15.60
17160
Costs:
Direct Material
1100*7.85
8635
Direct Labor
1100*1.90
2090
Supporting Assembly
1100*0.10*6.55
720.5
Processing batches
7*138.20
967.4
Processing Orders
2*52.60
105.2
Serving Customers
1191
Customer Margin
3450.9
Therefore, the right answer is option (C) $ 3450.90
Particulars
Computation
Amount ($)
Sales
1100*15.60
17160
Costs:
Direct Material
1100*7.85
8635
Direct Labor
1100*1.90
2090
Supporting Assembly
1100*0.10*6.55
720.5
Processing batches
7*138.20
967.4
Processing Orders
2*52.60
105.2
Serving Customers
1191
Customer Margin
3450.9
Therefore, the right answer is option (C) $ 3450.90
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