Question 2 (of 9) Save & ExitSubmit Time remaining: 0:43:59 value: 5.00 points T
ID: 343277 • Letter: Q
Question
Question 2 (of 9) Save & ExitSubmit Time remaining: 0:43:59 value: 5.00 points Thermai Rising, Inc., makes paragliders for sale through specaity 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 lllllllllllllllllllmlllllllllllllllHill Activity Rate Supporting direct labor Order processing Custom design processing Customer service $ 16 per direct labor-hour $ 198 per order $ 268 per custom design $ 426 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 Design Model Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider 3 2 0 29.50 32.00 1,700 2,360 $ 452 $582 The company's direct labor rate is $16 per hour. Required: Using the company's activity-based costing system, compute the customer margin of Big Sky Outfiters. (Do not round intermediate calculations. Round your final answer to the nearest dollar.) omer margihExplanation / Answer
Total revenue = (Number of gliders of each type * Selling price per glider)
= 11*1700 + 3*2360 = $ 25,780
Using Activity Based Costing,
Total cost of Standard model = Number of gliders * (Direct material cost per glider + direct labor hours per glider * labor cost per hour) + Number of orders * Ordering processing cost per order + Number of designs * design processing cost = 11*(452 + 29.5*16) + 2*198 + 0*268 = 10560
Total cost of Custom Design model = Number of gliders * (Direct material cost per glider + direct labor hours per glider * labor cost per hour) + Number of orders * Ordering processing cost per order + Number of designs * design processing cost = 3*(582 + 32*16) + 3*198 + 3*268 = 4680
Total cost = Total cost of Standard model + Total cost custom design model + Customer service = 10560 + 4680 + 426 = $ 15666
Customer margin = 25780 - 15666 = $ 10114
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.