Assign costs to customers by using an abc approach

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Reference no: EM132501200

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*     $1,308,960                                     $872,640

Sales force costs allocated* $783,000 $522,000

*Currently allocated on sales volume (units sold).

Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.

Required:

Question 1: Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.

Order filling rate$ per order

Selling call rate$ per sales call

Cost assignment:

Large retailer$ Smaller retailers$

Reference no: EM132501200

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