EXERCISE 7-5 Product and Customer Profitability Analysis [L07-4, L07-5] Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The com- pany 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 ...... .. $26 per direct labor-hour Order processing ... . .. . . . . . .. . $284 per order Custom design processing ...... $186 per custom design Customer service .. . .. . . . . $379 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfit- ters, which has ordered the following products over the last 12 months: Standard Custom Model Design Number of gliders . . . ... 20 3 Number of orders . .. . . . . . . . . . .. O - 3 Number of custom designs . . ...... 3 Direct labor-hours per glider . .. . .. . 26.35 Selling price per glider . . . . . . . . . ... 28.00 $1.850 Direct materials cost per glider . .. . . $2,400 $564 $634 The company's direct labor rate is $19.50 per hour