Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately
Question:
Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze's customer activity are as follows:
Large Retailer Smaller Retailers
Units purchased........................................108,000..........................72,000
Orders placed..................................................36...........................3,600
Number of sales calls.........................................18..............................882
Manufacturing costs..............................$43,200,000...................$28,800,000
Order filling costs allocated*....................$ 1,455,127.......................$ 970,085
Sales force costs allocated*........................$ 719,820......................$ 479,880
*Currently allocated on sales volume (units sold).
Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.
Required:
Assign costs to customers by using an ABC approach. Round activity rates and activity costs to the nearest dollar.
Step by Step Answer:
Managerial Accounting The Cornerstone of Business Decision Making
ISBN: 978-1337115773
7th edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger