Asked on 22 Nov 2017

EXERCISE 7-11 Second-Stage Allocation and Margin Calculations [LO7-4, L07-5] Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company's activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates: Activity Measure Activity Rate Activity Cost Pool Supporting direct labor ....... Batch processing ...... Order processing ....... ... Customer service ........... Number of direct labor-hours Number of batches Number of orders Number of customers $5.55 per direct labor-hour $107.00 per batch $275.00 per order $2,463.00 per customer The company just completed a single order from Interstate Trucking for 1.000 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.25 direct labor-hours. The selling price was $20 per unit, the direct materials cost was $8.50 per unit, and the direct labor cost was $6.00 per unit. This was Interstate Trucking's only order during the year. Required: Using Exhibit 7-12 as a guide, prepare a report showing the customer margin on sales to Interstate Trucking for the year.

Answered on 22 Nov 2017

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