COBRA SYSTEMS

Cobra Systems, Inc., makes gliders for sale through specialty sporting goods stores.

The company has a standard glider model, but also produces custom-designed gliders.

Cobra management has designed an activity-based costing system with the following

activity cost pools and activity rates:

Activity Cost Pool Activity Rate

Supporting Manufacturing $18 per direct labor hour

Order processing $192 per order

Custom designing $261 per custom design

Customer service $426 per customer

Management would like an analysis of the profitability of a particular customer, Eagle Wings,

which has ordered the following products over the last 12 months:

Standard Model Custom Design

Number of gliders 10 2

Number of orders 1 2

Number of custom designs 0 2

Director labor hours per glider 28.5 32.0

Selling price per glider $1,650 $2,300

Direct materials cost per glider $462 $576

The companys direct labor rate is $19 per hour.

Assignment:

Using the companys activity-based costing system, compute the customer margin of Eagle Wings.