Question
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
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 Active Rate
Supporting Direct Labor $ 22 per direct labor-hour
Order processing $ 192 per order
Custom design processing $255 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 11 3
Number of orders 2 3
Number of custom designs 0 3
Direct labor-hours per glider $27.50 $33.00
Selling price per glider $1650 $2370
Direct materials cost per glider $448 $574
The company's direct labor rate is $16 per hour.
Question: Using the company's activity based costing system, compute the customer margin of Big Sky Outfitters:
Customer Margin: ???
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