Spigelmyer Enterprises Makes a Variety of Products That It Sells

question 99

Essay

Spigelmyer Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning thatactivity-based costing system are listed below:
The cost of serving customers, $1,039.00 per customer, is the cost of serving a customer for one year.
Oelschlaeger Corporation buys only one of the company's products which Spigelmyer Enterprises sells for $18.05 per unit. Last year Oelschlaeger Corporation ordered a total of 1,100 units of this product in 2 orders. To fill the orders, 8 batches were required. The direct materials cost is $6.20 per unit and the direct labor cost is $5.70 per unit. Each unit requires 0.30 direct labor-hours.
Required:a. According to theactivity-based costing system, what is the cost of the "Supporting assembly" activity for Oelschlaeger Corporation for the year?b. According to theactivity-based costing system, what is the cost of the "Processing batches" activity for Oelschlaeger Corporation for the year?c. According to theactivity-based costing system, what is the cost of the "Processing orders" activity for Oelschlaeger Corporation for the year?d. According to theactivity-based costing system, what is the cost of the "Servicing customers" activity for Oelschlaeger Corporation for the year?e. What is the customer margin on sales to Oelschlaeger Corporation for the year?

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Definitions:

Revenue Test

An analysis or criterion used to determine whether a particular source of income qualifies as revenue for accounting or tax purposes.

Profit Or Loss Test

A financial metric used to determine if a business transaction resulted in making a profit or incurring a loss.

Operating Segment

A component of a business that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the same company.

Reportable Segment

A part of a company with distinguishable business activities from which it may generate revenues and incur expenses, and whose operating results are regularly reviewed by the company's chief operating decision-maker.