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.)
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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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
Activity Rate
$ 20 per direct labor-hour
$ 184 per order
$ 260 per custom design
$ 430 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
Standard
Custom
Model
Design
14
3
1
3
0
3
27.50
Direct labor-hours per glider
Selling price per glider
Direct materials cost per glider
The company's direct labor rate is $20 per hour.
Required:
$ 1,875
$ 450
32.00
$ 2,460
$ 570
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff4f6f42a-fa8b-4fab-b0ef-0bdbea8ab6ca%2Fd0bb959c-8c42-45d8-9022-699ce444a966%2F7cdx63b_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
Activity Rate
$ 20 per direct labor-hour
$ 184 per order
$ 260 per custom design
$ 430 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
Standard
Custom
Model
Design
14
3
1
3
0
3
27.50
Direct labor-hours per glider
Selling price per glider
Direct materials cost per glider
The company's direct labor rate is $20 per hour.
Required:
$ 1,875
$ 450
32.00
$ 2,460
$ 570
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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