Thermal Rising, Inc., makes paragliders for sale through specialty sporting good

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: 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: The company's direct labor rate is $ 19.50 per hour. Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.

Explanation / Answer

Standard: 20 x $1,850 = $37,000 Plus Custom: 3 x $2,400 = $7,200 Total: $44,200 Costs are as follows: Standard: Direct labor: 20 x 26.35 x 19.50 = $10,276.5 Direct Materials: 564 x 20 = $11,280 Order Processing: 1 x 284 = $284 Supporting manufacturing: 26 x 26.35 x 20 = $13,702 Custom Design: Direct Labor: 3 x 28 x 19.50 = $1,638 Direct Materials: 634 x 3 = $1,902 Custom Designing: 186 x 3 = $558 Order Processing: 284 x 3 = $852 Supporting Manufacturing: 26 x 28 x 3 = $2,184 Non-specific costs: Customer Service = $379 So it'll be sales - costs Standard: $37,000 - ($10,276.5 + $11,280 + $284 + $13,702) = $1,457.5 Custom: $7,200 - ( $1,638 + $1,902 + $558 + $852 + $2,184) = $336 Total margin = Standard profit + Custom profit - Non-specific costs $1,457.5 + $336 - $379 = $1,414.5

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.