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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 has 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 $ 16 per direct labor-hour $ 188 per order $ 259 per custom design $ 434 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has 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 $20 per hour. Required: Standard Model Custom Design 14 2 1 2 0 2 30.50 $1,850 31.00 $ 446 $ 2,450 $ 586 Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (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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