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 $ 22 per direct labor-hour $ 196 per order $ 253 per custom design $ 432 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 12 Ź Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 27.50 33.00 $ 1,750 $2,340 $ 480 $ 584 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

Customer margin

$ 398

Customer Margin : Big Sky Outfitters
Sales Revenue ( 12 x $ 1,750 + 2 x $ 2,340)		$ 25,680
Costs:
Direct materials ( 12 x $ 480 + 2 x $ 584 )	$ 6,928
Direct labor ( 12 x 27.50 x $ 20 + 2 x 33 x $ 20 )	7,920
Supporting direct labor ( 12 x 27.50 x $ 22 + 2 x 33 x $ 22 )	8,712
Order processing ( 4 orders x $ 196)	784
Custom design processing ( 2 x $ 253 )	506
Customer service ( 1 customer x $ 432 )	432
Total costs		25,282
Customer margin		$ 398