In: Accounting
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* | $1,636,200 | $1,090,800 | ||
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 | $ |
· Requirement asked
Order filling rate |
$750.00 |
per order |
Selling call rate |
$1,400.00 |
per sales call |
--Working
Order filling rate |
=+(1636200+1090800)/(36+3600) |
per order |
Selling call rate |
=+(756000+504000)/(18+882) |
per sales call |
Cost assignment: |
||
Large retailer |
$43,252,200 |
$43200000 + (36 x $750)+(18 x $1400) |
Small retailers |
$32,734,800 |
$28800000 + (3600 x $750)+(882 x $1400) |