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	Activity Rate
Supporting direct labor	$ 16	per direct labor-hour
Order processing	$ 198	per order
Custom design processing	$ 259	per custom design
Customer service	$ 418	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:

	Standard Model	Custom Design
Number of gliders	12	2
Number of orders	1	2
Number of custom designs	0	2
Direct labor-hours per glider	26.50	32.00
Selling price per glider	$ 1,875	$ 2,470
Direct materials cost per glider	$ 468	$ 572

The companys direct labor rate is $20 per hour.

Required:

Using the companys 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.)

Exercise 7-5 (Algo) Product and Customer Profitability Analysis (L07-4, 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 $ 198 per order $ 259 per custom design $ 418 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: Standard Model Number of gliders 12 Number of orders 1 Number of custom designs Direct labor-hours per glider 26. se Selling price per glider $ 1,875 Direct materials cost per glider $ 468 The company's direct labor rate is $20 per hour. Custom Design 2 2 2 32.ee $ 2,470 $ 572 Required: 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