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 $ per direct labourhour
Order processing $ per order
Customer service $ 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 months:
Standard Model Deluxe Model
Number of cases
Number of orders
Direct labourhours per case
Selling price per case $ $
Direct materials cost per case $ $
The companys direct labour rate is $ per hour.
Required:
Using the companys ABC system, compute the customer margin of Cell City.
