Exercise 3D: Product and customer profitability analysis (Value: 10 points) LMN Excercise, Inc. manufactures portable infrared saunas. It markets and sells them to gyms and spas who in turn sell them to their individual customers. The company has a generic model but also makes customer-specific models, especially for gyms. The cost activities and their respective rates in the activity costing system of the company are as follows: Cost activity Activity rate Custom Design $287 for each design Order Processing $211 per order Customer Service $470 per customer Direct support labor $19.80 per labor hour

Management has asked you for a profitability analysis of client Z. You have been provided with the following information regarding the orders of this client in the past 12 months. Direct labor rate: $21/hour Generic model Model with specifications Number of saunas 10 4 Number of orders 2 1 Number of designs with specifications 0 4 Direct labor for each sauna 32 hours 36 hours Sale price per sauna $1,990 $2,830 Cost of materials per sauna $580 $643

Required: Calculate the margin or profitability of client Z.