Reference no: EM132548375

BB Systems, Inc. makes paragliders for sale through 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 rate.

Activity                               Cost Pool                  Activity Rate

Supporting manufacturing    P18                   per direct labor- hour

Order processing               P192                  per order

Custom Designing               P261                 per custom design

Custom service                   P426                per customer

Management would like an analysis of the profitability of a particular customer, Fly High, which has ordered the following products over the last 12 months:

                                         Standard Model                         Custom Design

Number of Gliders                           10                                   2

Number of Orders                           1                                    2

Number of Custom Designs                0                                  2

Direct labor- hours per glider             28.5                            32.0

Selling price per glider                      1,650                         2,300

Direct materials cost per glider              462                          576

The company's direct labor rate is P19 per hour.

Required:

Question 1: Using the company's activity- based costing system, compute the customer margin of Fly High.