Question: Thermal Rising, Inc., 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 |
Activity Rate |
| Supporting direct labor |
$20 |
per direct labor-hour |
| Order processing |
$200 |
per order |
| Custom designing processing |
$261 |
per custom design |
| Customer service |
$434 |
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:
|
Standard
Model |
Custom
Design |
| Number of gliders |
10 |
3 |
| Number of orders |
1 |
3 |
| Number of custom designs |
0 |
3 |
| Direct labor-hours per glider |
27.50 |
31.00 |
| Selling price per glider |
$1,600 |
$2,370 |
| Direct materials cost per glider |
$462 |
$584 |
The company's direct labor rate is $20 per hour.
Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (Do not round intermediate calculations.)