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Activity-Based Customer Costing
Dormirbien 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 Dormirbien’s customer activity are as follows:
  Large Retailer Smaller Retailers Units purchased 36,000   34,000   Orders placed 12   1,060   Number of sales calls 6   294   Manufacturing costs $14,400,000   $9,600,000   Order filling costs allocated* $484,800   $323,200   Sales force costs allocated* $240,000   $160,000   *Currently allocated on sales volume (units sold).  
  Large Retailer Smaller Retailers Units purchased 36,000   34,000   Orders placed 12   1,060   Number of sales calls 6   294   Manufacturing costs $14,400,000   $9,600,000   Order filling costs allocated* $484,800   $323,200   Sales force costs allocated* $240,000   $160,000   *Currently allocated on sales volume (units sold).  
  Large Retailer Smaller Retailers
 
Large Retailer
Large Retailer
Smaller Retailers
Smaller Retailers
Units purchased 36,000   34,000  
Units purchased
36,000
 
34,000
 
Orders placed 12   1,060  
Orders placed
12
 
1,060
 
Number of sales calls 6   294  
Number of sales calls
6
 
294
 
Manufacturing costs $14,400,000   $9,600,000  
Manufacturing costs
$14,400,000
 
$9,600,000
 
Order filling costs allocated* $484,800   $323,200  
Order filling costs allocated*
$484,800
 
$323,200
 
Sales force costs allocated* $240,000   $160,000  
Sales force costs allocated*
$240,000
 
$160,000
 
*Currently allocated on sales volume (units sold).  
*Currently allocated on sales volume (units sold).
 
Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.
Required:
Required:
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 $______________________________
Order filling rate $ ___________ per order Selling call rate $ ______________per sales call Cost assignment:   Large retailer $_________________________ Smaller retailers $______________________________
Order filling rate $ ___________ per order
Order filling rate
$ ___________ per order
Selling call rate $ ______________per sales call
Selling call rate
$ ______________per sales call
Cost assignment:  
Cost assignment:
 
Large retailer $_________________________
Large retailer
$_________________________
Smaller retailers $______________________________
Smaller retailers
$______________________________
$______________________________

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