Compute the customer margin of big sky outfitters

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Reference no: EM131989550

Problem

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	$	196	per order
Custom designing processing	$	268	per custom design
Customer service	$	428	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		12		3
Number of orders		2		3
Number of custom designs		0		3
Direct labor-hours per glider		29.50		34.00
Selling price per glider	$	1,650	$	2,340
Direct materials cost per glider	$	458	$	566

The company's direct labor rate is $16 per hour.

Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.

Reference no: EM131989550

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