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 | $ | 18 | per direct labor-hour |
Order processing | $ | 192 | per order |
Custom design processing | $ | 259 | per custom design |
Customer service | $ | 420 | 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 |
| 29.50 |
| 34.00 |
Selling price per glider | $ | 1,675 | $ | 2,310 |
Direct materials cost per glider | $ | 442 | $ | 576 |
The companys direct labor rate is $16 per hour.
Required:
a. What is the Total Revenue from the products ordered by the customer Big Sky Outfitters
b. What is the Total Direct Material Cost for the products ordered by the customer Big Sky Outfitters
c. What is the Total Direct Labor Cost for the products ordered by the customer Big Sky Outfitters
d. What is the total cost of products ordered by the customer Big Sky Outfitters
e. What is the Customer Margin for Big Sky Outfitters
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