Canada Homework Help - Product Margin and Customer Margin ABC -- Calculations Provided. Thank you.

[NabilaM]

Hello Everyone. I would really appreciate some assistance finding the Product Margin and Customer Margin for this company:

http://imgur.com/LiPXwWl

Since total Sales which is not included, I multiplied the number of units (16) to selling price ($450) which comes to a total of $7200. However, when I add $7200, to the Direct Labour ($12) Direct Materials ($225) and Customer Orders (16) it comes to $7453 which will give me a negative number when I minus from $7200.

I also followed this formula:

The profit margin: 450-225-(4*12)
= 177*16 or 2,833
= 2,832/7200 = 39%

I know I am doing something wrong but cannot figure out how to solve this with the given information. I would appreciate your help. Thank you very much!

 

[bklynboy]

Since total Sales which is not included, I multiplied the number of units (16) to selling price ($450) which comes to a total of $7200. However, when I add $7200, to the Direct Labour ($12) Direct Materials ($225) and Customer Orders (16) it comes to $7453 which will give me a negative number when I minus from $7200.

I also followed this formula:

The profit margin: 450-225-(4*12)
= 177*16 or 2,833
= 2,832/7200 = 39%

I know I am doing something wrong but cannot figure out how to solve this with the given information. I would appreciate your help. Thank you very much!

I get the same for profit margin. I dont understand what you are trying to do in the first paragraph and what this is meant to represent since you are adding total sales +direct labor per hour cost + dircet materials for 1 unit + number of orders. Cant understand what that would mean.

Customer margin, I am not that familiar with but thought it was connected to Activity Costing and I don't believe all the data is available to determine (such as Overhead). If they mean what is the profit per customer then its Sales of 1 unit minus cost of producing 1 unit or 177 (450-225-(4*12)) as you note in your post. If its being used in a different basis please let me know and I will see how I can help.

 

[NabilaM]

Hi there! Thank you so much for helping me, I really appreciate it.

The reason why I added the total sales, DLH, DM and number of hours is from a formula I was following in my textbook and online tutorials as per Activity Based Costing formula for Product/Profit Margin calculations (but since some numbers are missing like you mentioned, I did not get the right answer). Which is why I did the other calculation where I got 39%. I have uploaded the full question -- I completed Question 1 & 2 already (it may make more sense, sorry ). I tried to calculate the total overhead cost for Procrastinet by adding Direct Labour (12), Direct Materials (225) and Total Sales (16x450) = $7437. However, I know I am doing this wrong too...