FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on t…
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Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] 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 $20 per direct labor-hour $ 188 per order $ 267 per custom design $ 428 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: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider The company's direct labor rate is $20 per hour. Required: Standard Model Custom Design 14 3 1 3 3 28.50 32.00 $ 1,825 $ 462 $ 2,410 $ 574 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.) Answer is complete but not entirely correct. Customer margin $ 571 X
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Transcribed Image Text:Exercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] 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 $20 per direct labor-hour $ 188 per order $ 267 per custom design $ 428 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: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider The company's direct labor rate is $20 per hour. Required: Standard Model Custom Design 14 3 1 3 3 28.50 32.00 $ 1,825 $ 462 $ 2,410 $ 574 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.) Answer is complete but not entirely correct. Customer margin $ 571 X
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