Orozco Enterprises 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 PoolActivity MeasureActivity Rate?Supporting assemblyDirect labor-hours (DLHs)$5.20per DLH?Processing batchesNumber of batches$107.55per batch?Processing ordersNumber of orders$88.75per order?Serving customersNumber of customers$1,793.00 per customerThe cost of serving customers, $1,793.00 per customer, is the cost of serving a customer for one year. Ellyson 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
purchased900units?Number of batches8batches?Number of orders2orders?Direct labor-hour requirement0.25DLHs per unit?Selling price$16.30per unit?Direct materials cost$6.60per unit?Direct labor cost$5.00per unitRequired:What is the customer margin on sales to Ellyson Corporation for the year?
What will be an ideal response?
| ? | Customer Margin-ABC Analysis | ? | ? |
| ? | Sales (900 units × $16.30 per unit) | ? | $14,670.00 |
| ? | Costs: | ? | ? |
| ? | Direct materials ($6.60 per unit × 900 units) | $5,940.00 | ? |
| ? | Direct labor ($5.00 per unit × 900 units) | 4,500.00 | ? |
| ? | Supporting assembly ($5.20 per DLH × 0.25 DLHs per unit × 900 units) | 1,170.00 | ? |
| ? | Processing batches ($107.55 per batch × 8 batches) | 860.40 | ? |
| ? | Processing orders ($88.75 per order × 2 orders) | 177.50 | ? |
| ? | Servicing customers ($1,793.00 per customer × 1 customer) | 1,793.00 | 14,440.90 |
| ? | Customer margin | ? | $229.10 |
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