Ther Inc., makes paragliders for sale through specialty sporting goods stores. T
ID: 2493534 • Letter: T
Question
Ther 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:
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 Supporting direct labor Order processing Custom designing processing Customer service Activity Rate S 18 per direct labor-hour $ 200 per order 265 per custom design S 436 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 Custom Model Design Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 14 30.50 31.00 $1,625 $2,360 S 482 S 572 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.) ustomer margin SExplanation / Answer
Margin= selling price- direct material-direct labour-overhead cost
According to ABC costing the cost of overheaf for each process is
Standard model and custom design:
Selling price=(14*1625)+(3*2360)=$29,830
Direct material=(482*14)+(572*3)=$8,464
direct labour=(30.5*20*14)+(31*20*3)=$10,400
overhead cost:
supp direct labour= (30.5*14*18)+(31*3*18)=9360
Order processing=(200*2)+(200*3)=$1000
custom design=(265*0)+(265*3)=795
custoemr service=436 (since for one customer)
Margin=29830-8464-10400-9360-1000-795-436=$-625
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