Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard
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 | Activity Rate | ||
Supporting direct labor | $ | 20 | per direct labor-hour |
Order processing | $ | 198 | per order |
Custom design processing | $ | 255 | per custom design |
Customer service | $ | 420 | 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:
StandardModel | CustomDesign | |||
Number of gliders | 16 | 2 | ||
Number of orders | 2 | 2 | ||
Number of custom designs | 0 | 2 | ||
Direct labor-hours per glider | 30.50 | 34.00 | ||
Selling price per glider | $ | 1,650 | $ | 2,320 |
Direct materials cost per glider | $ | 476 | $ | 574 |
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.)
Managerial accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer