Question

Question 4: 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 Activity Rate Supporting direct labor $ 16 per direct labor-hour Order processing $186 per order Custom design processing$269 per custom design Customer service $426 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 Number of gliders 16 3 Number of orders 2 3 Number of custom designs Direct labor-hours per glider 29,50 33.00 Selling price per glider $1,725 $2,310 Direct materials cost per glider$ 474 $ 568 0 The company's direct labor rate is $16 per hour. Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.

Answer 1

B2 custom design standard model 29.5 direct labor hours per unit number of gliders 16 3 HNM + DONOSI total direct labor cost total direct material cost total supporting direct labor cost total order processing cost total custom design processing cost customer service cost total customer cost revenue from customer standard model $ 7,552 $ 7,584 $ 7,552 $ 372 $0 custom design $ 1,584 $ 1,704 $ 1,584 $ 558 $ 807 total cost $ 9,136 $ 9,288 $ 9,136 $ 930 $ 807 $ 426 $ 29,723 $ 34,530 $ 4,807 customer margin

for formulas and calculations, refer to the image below -

x ✓ fx А в standard model custom design 29.5 33 direct labor hours per unit number of gliders 16 standard model custom design total direct labor cost =C3*C4*16 =D3*D4*16 total direct material cost =474*C4 =568*D4 total supporting direct labor cost =C3*C4*16 =D3*D4*16 total order processing cost =186*2 -186*3 total custom design processing cost =269*0 =269*3 customer service cost total customer cost revenue from customer customer margin total cost =C7+D7 =C8+D8 =C9+D9 =C10+D10 =C11+D11 =426*1 =SUM(E7:E12) =(C4*1725)+(D4*2310) =E14-E13

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