Reference no: EM132520326

Activity-Based Customer Costing

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                     $1,472,580                           $981,720

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$