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Customer Margin: Can you tell me whats wrong with my calculation

Asked Oct 16, 2009, 12:58 AM — 2 Answers
Use activity-based costing system with the following activity cost pools and activity rates:


*Activity Cost Pool* - *Activity Rate*

Supporting manufacturing - $20 per direct labor-hour

Order processing - $196 per order

Custom designing - $269 per custom design

Customer service - $436 per customer

Management would like an analysis of the profitability of a particular customer, Eagle Wings, which has ordered the following products over the last 12 months:

Standard - Custom

Number of gliders - 14 - 2

Number of orders - 2 - 2

Number of custom designs - 0 - 2

Direct labor-hours per glider - 29.5 - 33

Selling price per glider - $1,650 - $2,400

Direct materials cost per glider - $442 - $584


The company's direct labor rate is $18 per hour.

Customer Margin(?):

THESE ARE MY CALCULATIONS

Sales:
- Standard = 14 x 1650 = 23100
- Custom = 2 x 2400 = 4800
- Total= 27900

FOR STANDARD MODELS


Direct Labor: 14 x 29.5 x 18= 7434
Direct Material: 442 x 14 = 6188
Order Processing: 196 x 2 = 392
Supporting Manufacturing: 20 x 29.5 x 14 = 8260

Total: (7434+6188+392+8260) = 22274

FOR Custom MODELS

Direct Labor: 2 x 33 x 18 = 1188
Direct Material: 584 x 2 = 1168
Order Processing: 196 x 2 = 392
Supporting Manufacturing: 20 x 33 x 2 = 1320

Total: (1188+1168+392+1320) = 4068

Customer Margin: 27900 - (22274+4068) - (436)
27900 - 26342 - 436 = 1122

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2 Answers
morgaine300's Avatar
morgaine300 Posts: 6,564, Reputation: 1474
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#2

Oct 16, 2009, 09:04 PM
You missed the custom design, but otherwise great work.
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payalmehta2984's Avatar
payalmehta2984 Posts: 1, Reputation: 1
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#3

Feb 17, 2013, 04:57 PM
where does custom design go ?
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