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 $ 20 per direct labor-hour $ 198 per order $ 258 per custom design $ 430 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 13 3 03 29.50 31.00 $1,750 $2,330 $ 458 $ 582 The company's direct labor rate is $18 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.) Customer margin

Answer 1

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Statement showing Computations
Particulars	Standard Model	Custom Design	Total
Sales Revenue Standard = 1750*13 Custom = 2330 * 3	22,750.00	6,990.00	29,740.00
Less Costs:
Direct Material Costs Standard = 458*13 Custom = 582 * 3	5,954.00	1,746.00	7,700.00
Direct Labour Costs Standard = 13*29.50*18 Custom = 3*31*18	6,903.00	1,674.00	8,577.00
Overhead costs:
Supporting Direct Labour Standard = 13*29.50*20 Custom = 3*31*20	7,670.00	1,860.00	9,530.00
Order processing Standard = 1*198 Custom = 3*198	198.00	594.00	792.00
Custom Design processing Standard = 0*258 Custom = 258*3	-	774.00	774.00
Customer service			430.00
Total Costs			27,803.00
Customer Margin			1,937.00