Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] 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 th following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $18 per direct labor-hour $190 per order $ 262 per custom design $ 422 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 The company's direct labor rate is $22 per hour. Standard Model 10 2 0 29.50 $ 1,875 $ 472 Custom Design 3 3 3 32.00 $ 2,440 $ 576 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
Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] 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 th following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $18 per direct labor-hour $190 per order $ 262 per custom design $ 422 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 The company's direct labor rate is $22 per hour. Standard Model 10 2 0 29.50 $ 1,875 $ 472 Custom Design 3 3 3 32.00 $ 2,440 $ 576 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
![Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5]
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
Supporting direct labor
Order processing
Custom design processing
Customer service
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
Activity Rate
$ 18 per direct labor-hour
$190 per order
$ 262 per custom design
$ 422 per customer
Selling price per glider
Direct materials cost per glider
The company's direct labor rate is $22 per hour.
Customer margin
Standard
Model
10
2
0
29.50
$ 1,875
$ 472
Custom
Design
3
3
3
32.00
$ 2,440
$ 576
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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc6c0d929-b97e-4db6-a617-8a28ab3558c1%2Fe87332ce-aa62-4504-9ab9-3a459e0a165c%2Fklu4x93_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5]
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
Supporting direct labor
Order processing
Custom design processing
Customer service
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
Activity Rate
$ 18 per direct labor-hour
$190 per order
$ 262 per custom design
$ 422 per customer
Selling price per glider
Direct materials cost per glider
The company's direct labor rate is $22 per hour.
Customer margin
Standard
Model
10
2
0
29.50
$ 1,875
$ 472
Custom
Design
3
3
3
32.00
$ 2,440
$ 576
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.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education