Question

Check Exercise 7-5 Product and Customer Profitability Analysis (L07-4, LO7-5) 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 rates: Activity Cost Pool Supporting direct labor Order processing Activity Rate $ 20 per direct labor-hour $ 202 per order $ 264 per custom design $ 428 per customer Customer service Custome designerocessing $ 228 per custome design Management would like an analysis of the profitability of a particular custchner, Big Sky Outfitters, which has ordered the following products over the last 12 months: Standard Custom Model Design Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 29.50 33.00 $ 1,725 $2,360 $ 452 $ 572 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.) Customer margin

Answer 1

	Standard Model	Custom Design	Total
Sales Revenue	$           22,425	$                7,080	$             29,505
Costs
Direct Material	$              5,876	$                1,716	$               7,592
Direct Labor	$                 590	$                    660	$               1,250
Supporting Direct Labor	$                 590	$                    660	$               1,250
Order Processing	$                 202	$                    606	$                  808
Custom Design Processing	$                    -	$                    792	$                  792
Total Product Costs	$              7,258	$                4,434	$             11,692
Product Margin	$           15,167	$                2,646	$             17,813
Customer Service costs			$                  428
Customer Margin			$             17,385