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 $ 75 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: Standard Deluxe Model Model Number of cases Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case 160 35 5 2 0.25 $ $ 0.40 40 $ $ 65 12 15 The company's direct labour rate is $24 per hour.
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 $ 75 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: Standard Deluxe Model Model Number of cases Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case 160 35 5 2 0.25 $ $ 0.40 40 $ $ 65 12 15 The company's direct labour rate is $24 per hour.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 11E: Assign the customer-related activity costs to each customer type using activity rates. Now calculate...
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
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
Activity Rates
2 per direct labour-hour
21 per order
75 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:
Standard
Model
Deluxe
Model
Number of cases
160
35
Number of orders
Direct labour-hours per case
Selling price per case
Direct materials cost per case
2
0.25
0.40
40
65
12
$
15
The company's direct labour rate is $24 per hour.
Required:
Using the company's ABC system, compute the customer margin of Cell City.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College