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 Activity Rate Supporting direct labor $ 22 per direct labor-hour Order processing $ 182 per order Custom design processing $ 262 per custom design Customer service $ 436 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: Standard Model Custom Design Number of gliders 15 2 Number of orders 1 2 Number of custom designs 0 2 Direct labor-hours per glider 27.50 32.00 Selling price per glider $ 1,925 $ 2,420 Direct materials cost per glider $ 456 $ 576 The company’s direct labor rate is $16 per hour. 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 Activity Rate Supporting direct labor $ 22 per direct labor-hour Order processing $ 182 per order Custom design processing $ 262 per custom design Customer service $ 436 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: Standard Model Custom Design Number of gliders 15 2 Number of orders 1 2 Number of custom designs 0 2 Direct labor-hours per glider 27.50 32.00 Selling price per glider $ 1,925 $ 2,420 Direct materials cost per glider $ 456 $ 576 The company’s direct labor rate is $16 per hour. Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | Activity Rate | |
|---|---|---|
| Supporting direct labor | $ 22 | per direct labor-hour |
| Order processing | $ 182 | per order |
| Custom design processing | $ 262 | per custom design |
| Customer service | $ 436 | 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:
| Standard Model | Custom Design | |
|---|---|---|
| Number of gliders | 15 | 2 |
| Number of orders | 1 | 2 |
| Number of custom designs | 0 | 2 |
| Direct labor-hours per glider | 27.50 | 32.00 |
| Selling price per glider | $ 1,925 | $ 2,420 |
| Direct materials cost per glider | $ 456 | $ 576 |
The company’s direct labor rate is $16 per hour.
Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters.
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