Updraft Systems, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Manage- ment has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor... Order processing. Custom designing. Customer service $18 per direct labor-hour $192 per order $261 per custom design $426 per customer ... ...
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![EXERCISE 7-5 Product and Customer Profitability Analysis [LO4, LO5]
Updraft Systems, Inc., makes paragliders for sale through specialty sporting goods stores. The
company has a standard paraglider model, but also makes custom-designed paragliders. Manage-
ment has designed an activity-based costing system with the following activity cost pools and
activity rates:
Activity Cost Pool
Activity Rate
Supporting direct labor...
Order processing
Custom designing.
$18 per direct labor-hour
$192 per order
$261 per custom design
$426 per customer
Customer service
Management would like an analysis of the profitability of a particular customer, Eagle Wings,
which has ordered the following products over the last 12 months:
Standard
Custom
Model
Design
Number of gliders.
Number of orders
10
2
2
Number of custom designs
Direct labor-hours per glider.
Selling price per glider
Direct materials cost per glider
2
28.50
32.00
$1,650
$462
$2,300
$576
The company's direct labor rate is $19 per hour.
Required:
Using the company's activity-based costing system, compute the customer margin of Eagle Wings.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a5da53a-30bb-49c2-a2de-4611982de6ad%2F8e486446-2d6e-4e4d-8c4f-c55143633a0e%2Fq0as91_processed.jpeg&w=3840&q=75)
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