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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: |
| Activity Cost Pool | Activity Rate | |
| Supporting direct labor | $16 | per direct labor hour |
| Order processing | $202 | per order |
| Custom designing processing | $254 | per custom design |
| Customer service | $432 | per customer |
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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 |
Custom Design |
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| Number of gliders | 13 | 3 |
| Number of orders | 2 | 3 |
| Number of custom designs | 0 | 3 |
| Direct labor hours per glider | 28.5 | 34 |
| Selling price per glider | $1,650 | $2,390 |
| Direct materials cost per glider | $480 | $576 |
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| The company’s direct labor rate is $20 per hour. |
| Required: |
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Using the company’s activity based costing system, compute the customer margin of Big Sky Outfitters.(Negative amount should be indicated by a minus sign. Omit the “$” sign in your response.) |
I’d love any help. I thought I did it correctly and came up with $1518 and it wasnt right, retried and came up with $7998 and still wasn’t correct! I’d love to see what im doing wrong.