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ABC Costing
ABC Costing
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
$ $ $ $
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
44200
43,056.5 $ 1,144.5