Question

DelauderEnterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below:

Activity Cost Pool	Activity Measure	Activity Rate
Supporting assembly	Direct labor-hours (DLHs)	$	3.45	per DLH
Processing batches	Number of batches	$	193.30	per batch
Processing orders	Number of orders	$	83.05	per order
Serving customers	Number of customers	$	1,608.00	per customer

The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company’s products. The details of last year’s purchases of this product are listed below:

Number of units purchased		1,500	units
Number of batches		5	batches
Number of orders		2	orders
Direct labor-hour requirement		0.25	DLHs per unit
Selling price	$	18.55	per unit
Direct materials cost	$	8.35	per unit
Direct labor cost	$	3.95	per unit

According to the ABC system, the customer margin for this customer this past year was closest to:

Answer 1

Sales revenue		27825.00	=1500*18.55
Less: Costs
Direct materials cost	12525.00		=1500*8.35
Direct labor cost	5925.00		=1500*3.95
Supporting assembly	1293.75		=1500*3.45*0.25
Processing batches	966.50		=5*193.3
Processing orders	166.10		=83.05*2
Serving customers	1608.00
Total costs		22484.35
Customer margin		5340.65