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 Activity Rate
Supporting direct labor $ 16 per direct labor-hour
Order processing $ 194 per order
Custom design processing $ 261 per custom design
Customer service $ 432 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 CustomDesign
Number of gliders 15 2
Number of orders 2 2
Number of custom designs 0 2
Direct labor-hours per glider 27.50 33.00
Selling price per glider $ 1,625 $ 2,370
Direct materials cost per glider $ 450 $ 578
The company's direct labor rate is $18 per hour.
Required:
Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (Do not round intermediate calculations. Round your final answer to the nearest dollar.)
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