Answer Happy

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 $62 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 Number of cases Number of orders Direct labour-hours per caso Selling price per case Direct materials cost per case Standard Deluxe Model Model 210 65 5 2 0.25 0.40 $ 41 $ 61 $ 18 $ 21 The company's direct labour rate is $22 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City Answer is complete but not entirely correct. Sales 12,575 $ Costs: Direct materials Direct labour Supporting manufacturing Order processing Customer service Customer margin 7,430 1,265 115 X 147 62 9,019 $ 3,556