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 $ 194 per order $ 254 per custom design $ 416 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 11 Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 1 2 0 26.50 31.00 $ 1,700 $2,320 $ 470 $ 582 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

Revenue		23340	=(1700*11)+(2320*2)
Costs:
Direct materials	6334		=(470*11)+(582*2)
Direct labor	7070		=(26.5*20*11)+(31*20*2)
Supporting Direct labor	6363		=(26.5*18*11)+(31*18*2)
Order processing	582		=(1*194)+(2*194)
Custom design processing	508		=(2*254)
Customer service	416
Total costs		21273
Customer margin		2067