Activity-Based Customer CostingSleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze’s customer activity are as follows: Large RetailerSmaller RetailersUnits purchased108,000 72,000 Orders placed36 3,600 Number of sales calls18 882 Manufacturing costs$43,200,000 $28,800,000 Order filling costs allocated*$1,363,500 $909,000 Sales force costs allocated*$756,000 $504,000 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.Required:Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.Order filling rate$ per orderSelling call rate$ per sales callCost assignment: Large retailer$Smaller retailers$

Activity Based Costing: Activity Based Analysis is commonly known as ABC analysis. ABC analysis is…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Activity-Based Customer Costing

Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze’s customer activity are as follows:

	Large Retailer	Smaller Retailers
Units purchased	108,000		72,000
Orders placed	36		3,600
Number of sales calls	18		882
Manufacturing costs	$43,200,000		$28,800,000
Order filling costs allocated*	$1,363,500		$909,000
Sales force costs allocated*	$756,000		$504,000
*Currently allocated on sales volume (units sold).

Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.

Required:

Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.

Order filling rate	$ per order
Selling call rate	$ per sales call
Cost assignment:
Large retailer	$
Smaller retailers	$

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