Question

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 $ 19 per direct labour-hour Batch processing Number of batches $ 93 per batch Order processing Number of orders $ 177 per order Customer service Number of customers $ 1,330 per customer The company just completed a single order from SkateCo for 4,050 entry-level skateboards. The order was produced in 34 batches. Each skateboard required 0.4 direct labour-hours. The selling price was $135 per skateboard, the direct materials cost was $76.70 per skateboard, and the direct labour cost was $19.10 per skateboard. 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.

Answer 1

	Activity Based usage	ABC Rate	Activity Based usage*ABC rate
Supporting Direct labor(Direct labor hours)	1620	$                                             19	$                                  30,780
Batch Processing(No. of Batches)	34	$                                             93	$                                    3,162
Order Processing(No. of orders)	1	$                                           177	$                                       177
Customer Service(No. of customers)	1	$                                        1,330	$                                    1,330
Total Overhead Cost allocated			$                                  35,449
Statement showing customer Margin
Sales(4050*$135)	$                     5,46,750
Less:Material Cost(4050*$76.70)	$                     3,10,635
Less:Direct labor Cost(4050*$19.10)	$                        77,355
Less:Overhead Cost allocated	$                        35,449
Margin	$                     1,23,311
Margin per skateboard($123,311 / 4050)	$                          30.45