Question: 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 percent 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:
Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.
Required: Assign costs to customers by using an ABC approach. Round activity rates to two decimal places and the activity costs to the nearest dollar.