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Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company
Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom- designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 22 per direct labor-hour $ 184 per order $ 266 per custom design $ 434 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider. Selling price per glider Direct materials cost per glider The company's direct labor rate is $18 per hour. Required: Standard Custom Model Design 14 3 2 3 8 3 29.50 32.00 $1,950 $ 2,470 $ 452 $ 580 Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign. Customer margin
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