Roll Board Inc. manufactures several models of high-quality skateboards. The company’s ABC 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 labour Number of direct labour-hours $ 9 per direct labour-hour Batch processing Number of batches $ 43 per batch Order processing Number of orders $ 88 per order Customer service Number of customers $ 102 per customer The company just completed a single order from SkateCo for 1,350 entry-level skateboards. The order was produced in 28 batches. Each skateboard required 1.4 direct labour-hours. The selling price was $125 per skateboard, the direct materials cost was $68.80 per skateboard, and the direct labour cost was $17.70 per direct labour-hour. This was the only order from SkateCo for the year. Required: Prepare a report showing the customer margin on sales to SkateCo for the year.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Roll Board Inc. manufactures several models of high-quality skateboards. The company’s ABC 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 labour | Number of direct labour-hours | $ | 9 | per direct labour-hour |
| Batch processing | Number of batches | $ | 43 | per batch |
| Order processing | Number of orders | $ | 88 | per order |
| Customer service | Number of customers | $ | 102 | per customer |
The company just completed a single order from SkateCo for 1,350 entry-level skateboards. The order was produced in 28 batches. Each skateboard required 1.4 direct labour-hours. The selling price was $125 per skateboard, the direct materials cost was $68.80 per skateboard, and the direct labour cost was $17.70 per direct labour-hour. This was the only order from SkateCo for the year.
Required:
Prepare a report showing the customer margin on sales to SkateCo for the year.
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