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 PoolActivity RateSupporting direct labor$ 18per direct labor-hourOrder processing$ 198per orderCustom design processing$ 261per custom designCustomer service$ 426per customerManagement 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 ModelCustom DesignNumber of gliders123Number of orders23Number of custom designs03Direct labor-hours per glider26.5032.00Selling price per glider$ 1,925$ 2,470Direct materials cost per glider$ 458$ 582The companys direct labor rate is $16 per hour.
Required:
Using the companys activity-based costing system, compute the customer margin of Big Sky Outfitters.
Note: 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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