Question

Activity Cost Pool Total Cost Total Activity

Assembling $100726 16365 machine hours
Job Support $32748 1833 jobs
Customer support $5212 364 clients
Other $102496 Not applicable
The company uses an activity-based costing system for its overhead costs.
One particular customer requested 37 jobs during the year for a total of 125 units, requiring a total of 197 machine hours. Each unit requires $0.47 in direct materials and $1.65 in direct labor. The customer was charged $3731 for these jobs.
Compute the customer margin if they used traditional costing instead of ABC on the basis of machine hours. Round ONLY your final answer to the nearest whole dollar amount. Do not round intermediate calculations.

Answer 1

To compute the customer margin using traditional costing based on machine hours, calculate the total cost of labor and machine and subtract it from the revenue obtained.

Step-by-step explanation:

To compute the customer margin using traditional costing based on machine hours, we need to calculate the total cost of the jobs using the traditional costing method and then subtract the total cost from the revenue obtained.

First, we calculate the total cost of labor and machine based on the given information. Labor cost is $24 per hour, and machine cost is $24 per hour as well. Each job requires 1.65 hours of labor and 1.65 hours of machine, resulting in a total cost of $60.36 for labor and machine per job. Multiply this cost by the total number of jobs (37) to get the total cost of jobs, which is $2,232.12.

Next, we subtract the total cost of jobs from the revenue obtained, which is $3,731. The customer margin is given by revenue minus total cost of jobs, which equals $3,731 - $2,232.12 = $1,498.88.