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 $20per direct labor-hour
Order processing $196per order
Custom design processing $262per custom design
Customer service $434per 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 13 2
Number of orders 2 2
Number of custom designs 0 2
Direct labor-hours per glider 28.50 33.00
Selling price per glider $1,675 $2,360
Direct materials cost per glider $474 $576
The company's direct labor rate is $20 per hour.
Required:
Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.(Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.)
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