Question - Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglidar model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates:
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Activity Cost Pool
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Activity Rate
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Supporting direct labor
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$20 per direct labor-hour
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Order processing
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$186 per order
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|
Custom design processing
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$266 per custom design
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Customer service
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$432 per customer
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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:
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Standard Model
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Custom Design
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Number of gliders
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12
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2
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Number of orders
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1
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2
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Number of custom designs
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0
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2
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Direct labor-hours per glider
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28.50
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31.00
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Selling price per glider
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$1,675
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$2,310
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|
Direct materials cost per glider
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$470
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$582
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The company's direct labor rate is $22 per hour.
Required -
Using the company's activity-based system, compute the customer margin of Big Sky Outfitters.