1. 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 per direct labor-hour per order per custom design per customer

$ $ $ $

26 284 186 379

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 20 1 0 26.35 $ 1,850 $ 564 Custom Design 3 3 3 28.0 $ 2,400 $ 634

Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider

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. Solution:

Sales Costs: Direct materials Direct labor Supporting direct labor Order processing Custom designing Customer service Customer margin

$ $ 13,182 11915 15886 1136 558 379

44200

43,056.5 $ 1,144.5