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 $ 16 per direct labor-hour $ 200 per order $ 251 per custom design $ 432 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: Standard Model 15 2 Custom Design 2 Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 27.50 $ 1,850 $ 468 34.00 $ 2,410 $ 576 The company's direct labor rate is $16 per hour.
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 $ 16 per direct labor-hour $ 200 per order $ 251 per custom design $ 432 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: Standard Model 15 2 Custom Design 2 Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 27.50 $ 1,850 $ 468 34.00 $ 2,410 $ 576 The company's direct labor rate is $16 per hour.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$ 16 per direct labor-hour
$ 200 per order
$ 251 per custom design
$ 432 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:
Standard
Custom
Model
Design
Number of gliders
15
2
Number of orders
2
Number of custom designs
Direct labor-hours per glider
Selling price per glider
Direct materials cost per glider
2
27.50
$ 1,850
$ 468
34.00
$ 2,410
$ 576
The company's direct labor rate is $16 per hour.
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.)
X Answer is complete but not entirely correct.
Customer margin
1,870 X
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