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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 | $ | 20 | per direct labor-hour |
Order processing | $ | 196 | per order |
Custom design processing | $ | 258 | 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 | 12 | 2 | ||
Number of orders | 1 | 2 | ||
Number of custom designs | 0 | 2 | ||
Direct labor-hours per glider | 26.50 | 32.00 | ||
Selling price per glider | $ | 1,900 | $ | 2,470 |
Direct materials cost per glider | $ | 464 | $ | 566 |
|
The companys direct labor rate is $16 per hour.
what is the customer margin?
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