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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 Activity Rates $2 per direct labour-hour $20 per order $61 per customer Selling price per case Direct materials cost per case Standard Model 200 5 0.25 $ 40 $ 17 Deluxe Model 60 25 0.40 $ 60 $ 20 The company's direct labour rate is $20 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.

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 Activity Rates $2 per direct labour-hour $20 per order $61 per customer Selling price per case Direct materials cost per case Standard Model 200 5 0.25 $ 40 $ 17 Deluxe Model 60 25 0.40 $ 60 $ 20 The company's direct labour rate is $20 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
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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 $20 per order $61 per customer Sales Costs Standardi Model 200 5 0.25 $ 40 $ 17 Deluxe Model 60 2 0.40 $ 60 $ 20 The company's direct labour rate is $20 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.
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 $20 per order $61 per customer Sales Costs Standardi Model 200 5 0.25 $ 40 $ 17 Deluxe Model 60 2 0.40 $ 60 $ 20 The company's direct labour rate is $20 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.
Number of cases Number of orders. Direct labour-hours per case Selling price per case Direct materials cost per case The company's direct labour rate is $20 per hour. Sales Costs Direct materials Direct labour Supporting manufacturing Order processing Customer service Standard Deluxe Model Model 200 5 Customer margin $ Required: Using the company's ABC system, compute the customer margin of Cell City. 0.25 40 17 60 2 0.40 60 $ $ 20
Transcribed Image Text:Number of cases Number of orders. Direct labour-hours per case Selling price per case Direct materials cost per case The company's direct labour rate is $20 per hour. Sales Costs Direct materials Direct labour Supporting manufacturing Order processing Customer service Standard Deluxe Model Model 200 5 Customer margin $ Required: Using the company's ABC system, compute the customer margin of Cell City. 0.25 40 17 60 2 0.40 60 $ $ 20
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