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-   -   I cannot figure out the answer for this customer margin. (https://www.askmehelpdesk.com/showthread.php?t=564620)

  • Mar 23, 2011, 10:38 AM
    jnelso67
    I cannot figure out the answer for this customer margin.
    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 $18 per direct labor-hour
    Order processing $198 per order
    Custom designing processing $266 per custom design
    Customer service $422 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 1 3
    Number of custom designs 0 3
    Direct labor-hours per glider 27.5 31
    Selling price per glider $1,600 $2,390
    Direct materials cost per glider $480 $582

    --------------------------------------------------------------------------------


    The company's direct labor rate is $18 per hour.

    Required:
    Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)


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