Thermal Rising, Inc., makes paragliders for sale through specialty sporting good

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 has designed an activity-based costing system with the following activity cost pools and activity rates:

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:

The company’s direct labor rate is $16 per hour.

Required:

Using the company’s 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.)

Activity Cost Pool Activity Rate Supporting direct labor $ 16 per direct labor-hour Order processing $ 202 per order Custom design processing $ 263 per custom design Customer service $ 436 per customer

Explanation / Answer

Standard Custom Total Number of gliders 11 2 Selling price 1700 2330 Sales revneue 18700 4660 23360 Less: Cost Material 4994 1136 6130 labour cst 4664 1,024 5688 Activity cost: Supporting labor@ 16 4664 1024 5688 Order processing @ 202 404 404 808 Custom design processing @ 263 0 526 526 Customer Service 436 Customer Margin 4084

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