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: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 26 per direct labor-hour $ 284 per order $ 186 per custom design $ 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: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Custom Model Design 3 3 3 26.35 28.00 $1,850 $2,400 $ 564 634 20 0 The company's direct labor rate is $19.50 per hour. Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (Do not round intermediate calculations. Round your final answer to the nearest dollar.) Customer margin

Explanation / Answer

Revenue 44200 =(20*1850)+(3*2400) Costs: Direct materials 13182 =(20*564)+(3*634) Direct labor 11915 =(20*26.35*19.5)+(3*28*19.5) Supporting Direct labor 15886 =(20*26.35*26)+(3*28*26) Order processing 1136 =(1*284)+(3*284) Custom design processing 558 =186*3 Customer service 379 Total costs 43056 Customer margin 1145 or $1144

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