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 $ 18 per direct labor-hour $ 184 per order $ 255 per custom design $ 424 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 Custom Model Design 153 1 2 3 ω ω Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 30.50 33.00 $ 1,625 $ 2,300 $ 454 $ 586 The company's direct labor rate is $20 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.) IIIIIIIIIIIIIIIIIIIIIIIIIIIII Customer margin

Answer 1

Customer margin $(549) Calculation: Big Sky Outfitters Customer Margin - Activity Based costing $31,275 Sales Less. Costs: Direct Materials $8,568 Direct labor $ 11,130 Supporting direct labor $10,017 Order processing $920 Custom design processing $765 Customer service $424 $ 31,824 Customer Margin $ (549) (selling Price per glider x No. of gliders of standard model) + (selling Price der Glider of Custom Designed * No. of gliders of custom design)). Sales = [(* 1625 * 15) + (* 2,300 x 3)) Sales - $24,375 + $6,900 Sales & $31,275 Sales =

Direct Materials al cost per standard model glider x No. of standard model gliders) + (cost per custom meste og gleder x Number of custom designed glider)] Direct Materials 4 x 15) +($586 X 3)] = $6,810 + $1,758 = $8,568 Direct labor = [Direct labor mate per hour x Direct labor hours per standard model glider & Number of Standard model glider) + (Direct labor. rate per hour & Direct labor hours per custom designed glider x Number of custom designed glider) Dieet labor = [($20 x 30.50 X 15)+($20 * 33 x 3)] - $9,150 + $1,980 - $ 11, 130

Supporting direct labor / Supporting direct labor rate x Direct labor hours per standard model glider x Number of standard model guider) tl supporting direct labor hate x direct labor hours per custom designed glider x Number of custom designed gluder)) Supposting direct labor = {($ 18 x 30.50 x 15)+($18 x 33.00x3) = $0,235+ $ 1,782 a $ 10,017 Order Processing / Order Processing per order ratex Total Number of orders) = $184 per order X (2+3) orders = $184 x 5 orders - $920 Custom design processing = ($255 per custom design x 3 custom design) = $765 Customer service = $424 per customer x 1 customer = $424