Question

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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 Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 20 per direct labor-hour $ 196 per order $ 255 per custom design $ 424 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: Number of gliders Number of orders Number of custom designs irect labor-hours per glider Selling price per glider Direct materials cost per glider Standard Custom Model Design 162 22 02 29.50 33.00 $1,650 $2,400 S 466 566 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.) Customer margin

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Answer is highlighted in yellow: Solution: Amount $ 31,200 Customer Margin - ABC Analysis Particulars Sales (1650*16)+(2400*2) Costs: Direct Materials (466*16)+(566*2) Direct Labor (29.50*16)* 20 + (33*2)*20 Supporting direct labor (29.50*16)* 20 + (33*2)*20 Order Processing (196*4) Custom Designing Processing (255*2) Customer Service $ 8,588 $ 10,760 $ 10,760 $ 784 $ 510 $ 424 $ 31,826 $ -626 Customer Margin