Question
EXERCISE 7-5 Product and Customer Profitability Analysis [L04, L05] Updraft Systems, Inc.. makes paragliders for sale through specialty sporting goods stores. The company has
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EXERCISE 7-5 Product and Customer Profitability Analysis [L04, L05] Updraft Systems, Inc.. makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Manage- ment 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 designing.. Customer service.. Activity Rate $18 per direct labor-hour $192 per order $261 per custom design $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: Number of gliders.. Number of orders. Number of custom designs. Direct labor-hours per glider.. Selling price per glider Direct materials cost per glider. Standard Model Custom Design 10 2 1 2 0 2 28.50 32.00 $1,650 $2,300 $462 $576 The company's direct labor rate is $19 per hour. Required: Using the company's activity-based costing system, compute the customer margin of Eagle Wings,
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