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: Required:Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters. Activity Cost PoolActivity Rate$26 per direct labor-hour$284 per order$186 per custom design$379 per customerSupporting direct laborOrder processing ...Custom design processingCustomer service ...Management would like an analysis of the profitability of a particular customer, Big Sky Outfit-ters, which has ordered the following products over the last 12 months:StandardCustomModelDesignNumber of glidersNumber of orders...Number of custom designs203133Direct labor-hours per glider26.3528.00Selling price per glider ..Direct materials cost per glider$1,850$564$2,400$634The company's direct labor rate is $19.50 per hour.

Calculate sales for the standard model and custom design as follows: For the standard model: For…

Answered: Activity Cost Pool Activity Rate $26…

Managerial Accounting: The Cornerstone of Business Decision-Making

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ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

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Problem 61P: Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a...

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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:

Required:
Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters.

Activity Cost Pool
Activity Rate
$26 per direct labor-hour
$284 per order
$186 per custom design
$379 per customer
Supporting direct labor
Order processing ...
Custom design processing
Customer service ...
Management would like an analysis of the profitability of a particular customer, Big Sky Outfit-
ters, 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
20
3
1
3
3
Direct labor-hours per glider
26.35
28.00
Selling price per glider ..
Direct materials cost per glider
$1,850
$564
$2,400
$634
The company's direct labor rate is $19.50 per hour.

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