Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company’s 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 $ 5.55 per direct labor-hour Batch processing Number of batches $ 107.00 per batch Order processing Number of orders $ 275.00 per order Customer service Number of customers $ 2,463.00 per customer     The company just completed a single order from Interstate Trucking for 1,000 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.25 direct labor-hours. The selling price was $20 per unit, the direct materials cost was $8.50 per unit, and the direct labor cost was $6.00 per unit. This was Interstate Trucking’s only order during the year.   Required: Calculate the customer margin on sales to Interstate Trucking for the year. (Round your answers to 2 decimal places.)

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Chapter1: Financial Statements And Business Decisions
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Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company’s 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 $ 5.55 per direct labor-hour
Batch processing Number of batches $ 107.00 per batch
Order processing Number of orders $ 275.00 per order
Customer service Number of customers $ 2,463.00 per customer
 

 

The company just completed a single order from Interstate Trucking for 1,000 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.25 direct labor-hours. The selling price was $20 per unit, the direct materials cost was $8.50 per unit, and the direct labor cost was $6.00 per unit. This was Interstate Trucking’s only order during the year.

 

Required:

Calculate the customer margin on sales to Interstate Trucking for the year. (Round your answers to 2 decimal places.)

Expert Solution
Step 1

Overhead costs = No. of activity x Activity Rate

Margin on sales = Direct materials cost - direct labor cost - Overhead costs

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