Question: PWC Systems Inc makes personal watercraft for sale through specialty

PWC Systems Inc. makes personal watercraft for sale through specialty sporting goods stores. The company has a standard model but also makes custom-designed models. Management has designed an ABC system with the following activity cost pools and activity rates:
Activity Cost Pool Activity Rates
Supporting manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22 per direct labour-hour
Order processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $212 per order
Custom design processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $243 per custom design
Customer service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307 per customer
Management would like an analysis of the profitability of a particular customer, WaveRider, which has ordered the following products over the last 12 months:
The company’s direct labour rate is $24 per hour.
Required:
Using the company’s ABC system, compute the customer margin of WaveRider.

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  • CreatedJuly 08, 2015
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