Question
Thermal Rising, Incorporated, 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, Incorporated, 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 Rates
Supporting Direct Labor $26 per direct labor hour
Order Processing $284 per order
Customer Design Processing $186 per customer design
Customer Service $379 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 Model
Number of gliders 20 3
Number of orders 1 3
Number of custom designs 0 3
DL hours per glider 26.34 28.00
Selling price $1,850 $2,400
DM cost per glider $564 $634
The companys direct labor rate is $19.50 per hour. 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.)
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