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 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: Number of cases Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case Sales Costs: Direct materials Direct labour Activity Rates $2 per direct labour-hour $28 per order $69 per customer Supporting manufacturing Order processing Customer service Customer margin Standard Model 280 5 The company's direct labour rate is $28 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City. 0.25 $ 48 $ 25 Deluxe Model 100 2 0.40 $68 $ 28 0

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
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:
Number of cases
Number of orders
Direct labour-hours per case
Selling price per case
Direct materials cost per case
Activity Rates
$2 per direct labour-hour
$28 per order
$69 per customer
The company's direct labour rate is $28 per hour.
Sales
Costs:
Direct materials
Direct labour
Supporting manufacturing
Order processing
Customer service
Standard
Model
280
5
Customer margin
0.25
$48
$25
Required:
Using the company's ABC system, compute the customer margin of Cell City,
Deluxe
Model
$
100
2
0.40
$ 68
$ 28
0
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 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: Number of cases Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case Activity Rates $2 per direct labour-hour $28 per order $69 per customer The company's direct labour rate is $28 per hour. Sales Costs: Direct materials Direct labour Supporting manufacturing Order processing Customer service Standard Model 280 5 Customer margin 0.25 $48 $25 Required: Using the company's ABC system, compute the customer margin of Cell City, Deluxe Model $ 100 2 0.40 $ 68 $ 28 0
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