**Thermal Rising, Incorporated: Activity-Based Costing System Overview**Thermal Rising, Incorporated, specializes in the manufacture of paragliders sold through specialty sporting goods stores. The company provides both a standard paraglider model and custom-designed paragliders. To aid in financial management, Thermal Rising employs an activity-based costing system. Below are the activity cost pools and corresponding activity rates:| **Activity Cost Pool** | **Activity Rate** ||--------------------------------|-----------------------------------|| Supporting direct labor | $16 per direct labor-hour || Order processing | $188 per order || Custom design processing | $251 per custom design || Customer service | $434 per customer |**Customer Profitability Case Study: Big Sky Outfitters**To evaluate the profitability of the customer, Big Sky Outfitters, Thermal Rising analyzed the following data over the past 12 months:| | **Standard Model** | **Custom Design** ||--------------------------------------|-------------------|-------------------|| Number of gliders | 15 | 3 || Number of orders | 1 | 3 || Number of custom designs | 0 | 3 || Direct labor-hours per glider | 29.50 | 33.00 || Selling price per glider | $1,900 | $2,470 || Direct materials cost per glider | $472 | $580 |- **Company's Direct Labor Rate**: $20 per hour**Assignment:**Using Thermal Rising's activity-based costing system, compute the customer margin for Big Sky Outfitters. Consider all relevant costs and revenues associated with their orders for accurate profitability analysis.

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. 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 Activity Rate $ 16 per direct labor-hour $ 188 per order $ 251 per custom design $434 per customer Number of custom designs Direct labor-hours per glider Standard Model Selling price per glider Direct materials cost per glider The company's direct labor rate is $20 per hour. 15 1 0 29.50 $1,900 $ 472 Custom Design 3 3 3 33.00 $ 2,470 $ 580 Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.

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. 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 Activity Rate $ 16 per direct labor-hour $ 188 per order $ 251 per custom design $434 per customer Number of custom designs Direct labor-hours per glider Standard Model Selling price per glider Direct materials cost per glider The company's direct labor rate is $20 per hour. 15 1 0 29.50 $1,900 $ 472 Custom Design 3 3 3 33.00 $ 2,470 $ 580 Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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