Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standardparaglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with thefollowing activity cost pools and activity rates:Activity Cost PoolSupporting direct laborOrder processingCustom design processingCustomer serviceActivity Rate$20 per direct labor-hour$ 198 per order$ 267 per custom design$ 434 per customerManagement wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products overthe last 12 months:Number of glidersNumber of ordersNumber of custom designsDirect labor-hours per gliderSelling price per gliderDirect materials cost per gliderStandardModelCustom Design122220229.50$ 1,80032.00$ 472$ 2,490$ 576The 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.Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be enteredwith a minus sign.Customer margin

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Description: Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standardparaglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with thefo

ACTIVITY-BASED COSTINGActivity-based costing is one of the methods used to allocate the overheads to…

Business

Accounting

Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.

Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

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 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
$ 198 per order
$ 267 per custom design
$ 434 per customer
Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which 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
Model
Custom Design
12
2
2
2
0
2
29.50
$ 1,800
32.00
$ 472
$ 2,490
$ 576
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.
Note: 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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