Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard
Question:
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 has 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 | $ 186 | per order |
Custom design processing | $ 260 | per custom design |
Customer service | $ 432 | 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 Model | Custom Design | |
---|---|---|
Number of gliders | 12 | 3 |
Number of orders | 1 | 3 |
Number of custom designs | 0 | 3 |
Direct labor-hours per glider | 26.50 | 32.00 |
Selling price per glider | $ 1,800 | $ 2,490 |
Direct materials cost per glider | $ 468 | $ 570 |
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