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 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
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
Activity Rate
$20 per direct labor-hour
$ 192 per order
$255 per custom design
$424 per customer
Selling price per glider
Direct materials cost per glider.
The company's direct labor rate is $20 per hour.
Customer margin
Standard
Model
14
1
0
28.50
$ 1,850
$ 446
Custom
Design
2
33.00
$ 2,490
$570
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 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 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 Activity Rate $20 per direct labor-hour $ 192 per order $255 per custom design $424 per customer Selling price per glider Direct materials cost per glider. The company's direct labor rate is $20 per hour. Customer margin Standard Model 14 1 0 28.50 $ 1,850 $ 446 Custom Design 2 33.00 $ 2,490 $570 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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