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 $ 16 per direct labor-hour $ 198 per order $ 260 per custom design $ 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 Custom Model Design Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 29.50 33.00 $1,700 $2,360 $ 464 $ 570 The company's direct labor rate is $16 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

Calculation of customer margin for Big Sky Outfitters
	Standard	Custom	Total
Sales Revenue	23,800	4,720	28,520
Less: Costs
Direct material	6,496	1,140	7,636
Direct labor	6,608	1,056	7,664
Overheads
Supporting Direct Labor	6,608	1,056	7,664
Order Processing	396	396	792
Customer Design Processing	-	520	520
Customer Service			432
Total cost			24,708
Customer Margin			3,812

в с р A 1 Calculation of customer margin for Big Sky Outfitters 2 Standard =1700*14 Custom Total =2360*2 =B3+C3 =464*14 =570*2 =B5+C5 = 29.5*14*16 =33*2*16 =B6+C6 3 Sales Revenue 4 Less: Costs 5 Direct material 6 Direct labor 7 Overheads 8 Supporting Direct Labor 9 Order Processing 10 Customer Design Processing 11 Customer Service 12 Total cost 13 Customer Margin 14. = 29.5*14*16 =33*2*16 =B8+C8 =198*2 =198*2 =B9+C9 =260*2 =B10+C10 432 =SUM(D5:D11) =D3-D12