xercise 7-11 (Algo) Second-Stage Allocation and Margin Calculations [LO7-4, LO7-5] Foam Products, Incorporated, makes foam...
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xercise 7-11 (Algo) Second-Stage Allocation and Margin Calculations [LO7-4, LO7-5]
Foam Products, Incorporated, makes foam seat cushions for the automotive and aerospace industries. The companys activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates:
Activity Cost Pool
Activity Measure
Activity Rate
Supporting direct labor
Number of direct labor-hours
$ 9
per direct labor-hour
Batch processing
Number of batches
$ 96
per batch
Order processing
Number of orders
$ 279
per order
Customer service
Number of customers
$ 2,620
per customer
The company just completed a single order from Interstate Trucking for 2,400 custom seat cushions. The order was produced in three batches. Each seat cushion required 0.6 direct labor-hours. The selling price was $142.10 per unit, the direct materials cost was $106 per unit, and the direct labor cost was $14.70 per unit. This was Interstate Truckings only order during the year.
Required:
Calculate the customer margin on sales to Interstate Trucking for the year.
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