FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
Supporting direct labor
Order processing
Custom design processing
Customer service.
Activity Rate
$22 per direct labor-hour
$ 200 per order
$ 270 per custom design
$ 424 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:
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.
Standard
Model
12
2
0
29.50
$ 1,825
$ 476
Custom
Design
2
2
2
33.00
$ 2,400
$ 574
Required:
Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.
Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should
be entered with a minus sign.
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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 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 $22 per direct labor-hour $ 200 per order $ 270 per custom design $ 424 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: 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. Standard Model 12 2 0 29.50 $ 1,825 $ 476 Custom Design 2 2 2 33.00 $ 2,400 $ 574 Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.
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