Exercise $7-5($Algo$)$ Product and Customer Profitability Analysis $[$LO$7-4,$ LO$7-5]$

Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom$-$designed paragliders. Management designed an activity$-$based costing system with the following activity cost pools and activity rates:

Activity Cost Pool Activity Rate

Supporting direct labor $ $18$ per direct labor$-$hour

Order processing $ $202$ per order

Custom design processing $ $262$ per custom design

Customer service $ $420$ per customer

Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last $12$ months:

Standard Model Custom Design

Number of gliders $142$

Number of orders $12$

Number of custom designs $02$

Direct labor$-$hours per glider $29\mathrm{.}5034\mathrm{.}00$

Selling price per glider $ $1,850$ $ $2,440$

Direct materials cost per glider $ $454$ $ $572$

The company$$s direct labor rate is $$22$ per hour.

Required:

Using the company$$s activity$-$based costing system, compute the customer margin of Big Sky Outfitters.