Muscat Sports company makes shoes for sale through specialty sporting goods stores. The company has...
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Accounting
Muscat Sports company makes shoes for sale through specialty sporting goods stores. The company has a standard shoe model and custom designed shoes. Management has designed an activity based costing with the following activity cost pools and activity rates:
Activity cost pool
Activity Rate
Supporting manufacturing
$9 per direct labor hour
Order processing
$8 per order
Custom designing
$13 per custom design
Customer service
$2 per customer
Management would like an analysis of the profitability of a particular customer, Khamis Footwear, which has ordered the following products over the last 12 months.
Standard
Model
Customer
Design
Number of shoes
100
20
Number of orders
1
3
Number of custom designs
0
20
Direct labor-hours per shoe
4
10
Selling price per shoe
$85
$150
Direct Materials cost per shoe
$3
$7
The companys direct labor rate is $7 per hour.
Required:
Using the companys activity-based costing system, compute the customer margin of Khamis footwear.
Activity cost pool | Activity Rate |
Supporting manufacturing | $9 per direct labor hour |
Order processing | $8 per order |
Custom designing | $13 per custom design |
Customer service | $2 per customer |
Management would like an analysis of the profitability of a particular customer, Khamis Footwear, which has ordered the following products over the last 12 months.
| Standard Model
| Customer Design |
Number of shoes | 100 | 20 |
Number of orders | 1 | 3 |
Number of custom designs | 0 | 20 |
Direct labor-hours per shoe | 4 | 10 |
Selling price per shoe | $85 | $150 |
Direct Materials cost per shoe | $3 | $7 |
The companys direct labor rate is $7 per hour.
Required:
Using the companys activity-based costing system, compute the customer margin of Khamis footwear.
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