Question

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 $ 182 per order $ 266 per custom design $ 420 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 Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Custom Model Design 12 3 2 3 3 29.50 34.00 $ 1,700 $ 2,350 $ 460 $ 584 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. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.) Customer margin

Answer 1

D A B с Standard Custom 1 Model Design 2 Number of gliders 12 3 3 Direct labor hours per glider 29.5 34 4 Total Direct labor hours 354 102 5 Standard Custom Total Model Design 6 7 Sales $ 20,400 $ 7,050 $ 27,450 8 Less: 9 Direct material cost $ 5,520 $ 1,752 $ 7,272 10 Direct labor cost $ 7,788 $ 2,244 $ 10,032 11 Overhead: 12 Supporting direct labor $ 7,080 $ 2,040 $ 9,120 13 Order processing $ 364 $ 546 $ 910 14 Custom design processing $ $ 798 $ 798 15 Customer service $ 420 16 Customer Margin $ -1,102

D А B Standard 1 Model 2 Number of gliders 3 Direct labor hours per glider 29.5 4 Total Direct labor hours =+B2*B3 5 C Custom Design 3 34 12 =+C2*C3 Standard Model Custom Design Total =12*1700 =3*2350 =+B7+C7 =3*584 =+B9+C9 1=12*460 =22*B4 =22*04 =+B10+C10 6 7 Sales 8 Less: 9 Direct material cost 10 Direct labor cost 11 Overhead: 12 Supporting direct labor 13 Order processing 14 Custom design processing 15 Customer service 16 Customer Margin =+C4*20 =20*B4 =182*2 =182*3 =2660 =266*3 =+B12+C12 =+B13+C13 =+B14+C14 420 |=+D7-SUM(09:015)