Alrex company is using an activity-based costing (ABC) system. The company produces and sells two products: Basic and Pro. The company consists of two departments: Production (where all manufacturing activities are taken) and Marketing (which engages in selling and admin activity only). The ABC system includes in unit product costs all costs easily associated with units. In addition, in the ABC system, there are four major indirect activities: Machine Setups, Special Processing, Factory Supervision, and Customer Relation.
The prices, direct material cost (DM), shipping cost and direct labor-hours (DLHs) are given below for one unit of the product, as well as the total units produced and sold.
Product
Price
DM
DLHs
Hourly Wage-DL
Shipping Cost
Units
Basic
$180
$50
1
$10
$1
6,000
Pro
$320
$80
2
$12
$4
4,000
The company collected the data for ABC as follows:
Activity Cost Pool
Activity Measure
Estimated OH cost
Activity measures used
Basic
Pro
Machine Setup
# of setups
$ 472,500
60
120
Special Processing
Machine hours
$ 360,000
6,000
10,000
Factory Supervision
DLH
$ 224,000
Customer Relation (10 customers)
# of customers
$ 240,000
The company has two major customers (A and B), who buy their products in the amounts in the table below.
CustomerAB
Basic8002,000units
Pro1,2001,000units
How much is the ABC customer margin of customer B? (Choose the closest amount.)
Answers: 1
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Alrex company is using an activity-based costing (ABC) system. The company produces and sells two pr...
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