Question
12. Nibu, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders.
12. Nibu, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting manufacturing $16.5 per DLH Order Processing Custom designing $190.5 per order $259.5 Customer service $424.5 Management would like an analysis of the profitability of a particular customer, ABC which has ordered the following products over the last 12 months: Standard Model Custom Design Number of gliders Number of orders Number of custom designs 5 1 1 3 0 2 17.5 $1,750 $2,150 $412 Direct Labor Hours per glider 12.5 Selling Price per glider Direct Material Cost per glider $375 The company's direct labor rate is $17.5 per hour. Required: Using the company's activity-based costing system, compute the customer margin of ABC. (5 marks)
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