Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following ae pools and activity rates for these models: Activity Cost Pool Supporting manufacturing Order processing Activity Rates $ 2 per direct labour-hour $ 21 per order $ 75 per customer Customer service Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following pror the last 12 months:
Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following ae pools and activity rates for these models: Activity Cost Pool Supporting manufacturing Order processing Activity Rates $ 2 per direct labour-hour $ 21 per order $ 75 per customer Customer service Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following pror the last 12 months:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
Supporting manufacturing
Order processing
Customer service
Activity Rates
2 per direct labour-hour
21 per order
75 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 12 months:
Standard
Model
Deluxe
Model
Number of cases
160
35
Number of orders
Direct labour-hours per case
Selling price per case
Direct materials cost per case
2
0.25
0.40
40
65
12
$
15
The company's direct labour rate is $24 per hour.
Required:
Using the company's ABC system, compute the customer margin of Cell City.
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