**Thermal Rising, Incorporated: Activity-Based Costing System Analysis**Thermal Rising, Incorporated, specializes in the production of paragliders, distributed through specialty sporting goods retailers. In addition to a standard paraglider model, the company offers custom-designed options. The company employs an activity-based costing system, delineated by specific activity cost pools and associated rates:**Activity Cost Pools and Activity Rates:**- Supporting Direct Labor: $18 per direct labor-hour- Order Processing: $192 per order- Custom Design Processing: $256 per custom design- Customer Service: $432 per customer**Profitability Analysis for Big Sky Outfitters**Management seeks to assess the profitability of Big Sky Outfitters, a customer that placed orders over the past 12 months, detailed below:| | Standard Model | Custom Design ||---------------------------------------|----------------|---------------|| Number of Gliders | 12 | 3 || Number of Orders | 2 | 3 || Number of Custom Designs | 0 | 3 || Direct Labor-Hours per Glider | 28.50 | 32.00 || Selling Price per Glider | $1,800 | $2,480 || Direct Materials Cost per Glider | $456 | $576 |- **Direct Labor Rate**: The company’s direct labor rate is $22 per hour.**Required Analysis:**Utilizing the activity-based costing system, calculate the customer margin for Big Sky Outfitters. Ensure that all intermediate calculations and final answers are rounded to the nearest whole dollar. Indicate loss amounts with a minus sign.**Instructions for Calculation:**1. **Calculate Total Direct Labor Costs** for both standard and custom models.2. **Determine Total Order and Design Costs** based on the number of orders and custom designs.3. **Compute Total Customer Service Costs** for the client.4. **Derive Total Costs and Compare Against Revenue** to establish customer margin.This breakdown provides a comprehensive cost analysis, crucial for strategic pricing and customer relationship management decisions.

Activity-based costing is used to allocate overhead expenses on the basis of activity. Other than…

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 following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Number of gliders Number of orders Activity Rate $18 per direct labor-hour 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 custom designs Direct labor-hours per glider $ 192 per order $ 256 per custom design $432 per customer Selling price per glider Direct materials cost per glider The company's direct labor rate is $22 per ur. Standard Model 12 2 0 28.50 $ 1,800 $ 456 Custom Design 3 3 3 32.00 $2,480 $ 576 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.)

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 following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Number of gliders Number of orders Activity Rate $18 per direct labor-hour 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 custom designs Direct labor-hours per glider $ 192 per order $ 256 per custom design $432 per customer Selling price per glider Direct materials cost per glider The company's direct labor rate is $22 per ur. Standard Model 12 2 0 28.50 $ 1,800 $ 456 Custom Design 3 3 3 32.00 $2,480 $ 576 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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