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 | $ | 200 | per order |
Custom design processing | $ | 252 | per custom design |
Customer service | $ | 416 | 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 | 12 | 3 | ||
Number of orders | 2 | 3 | ||
Number of custom designs | 0 | 3 | ||
Direct labor-hours per glider | 29.50 | 32.00 | ||
Selling price per glider | $ | 1,675 | $ | 2,350 |
Direct materials cost per glider | $ | 462 | $ | 574 |
The companys direct labor rate is $22 per hour.
Required:
Using the companys 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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started