XERCISE $8-5$ Product and Customer Profi tability Analysis $[$ LO$4,$ LO$5]$

Updraft Systems, 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 manufacturing $..........$ $$18$ per direct labor$-$hour

Order processing $.................$ $$192$ per order

Custom designing $................$ $$261$ per custom design

Customer service $................$ $$426$ per customer

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CONFIRMING PAGES

$352$ Chapter $8$

Management would like an analysis of the profi tability of a particular customer, Eagle Wings, which

has ordered the following products over the last $12$ months:

Standard Custom

Model Design

Number of gliders $....................102$

Number of orders $....................12$

Number of custom designs $.............02$

Direct labor$-$hours per glider $............28\mathrm{.}532\mathrm{.}0$

Selling price per glider $.................$ $$1,650$ $$2,300$

Direct materials cost per glider $..........$ $$462$ $$576$

The company$$s direct labor rate is $$19$ per hour.

Required:

Using the company$$s activity$-$based costing system, compute the customer margin of Eagle Wings.