Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard
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Thermal Rising, Inc., 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 | $ | 20 | per direct labor-hour |
Order processing | $ | 186 | per order |
Custom designing processing | $ | 252 | per custom design |
Customer service | $ | 430 | 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 | 15 | 2 | ||
Number of orders | 2 | 2 | ||
Number of custom designs | 0 | 2 | ||
Direct labor-hours per glider | 27.50 | 32.00 | ||
Selling price per glider | $ | 1,675 | $ | 2,390 |
Direct materials cost per glider | $ | 466 | $ | 584 |
The companys direct labor rate is $20 per hour. |
find the customer margin
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