Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates:
Activity Cost Pool
Activity Rate
Supporting direct labor
$ 26 per direct labor-hour
Order processing
$ 284 per order
Custom design processing
$ 186 per custom design
Customer service
$ 379 per customer
Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months:
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.
Note: Round your intermediate calculations and final answer to the nearest whole dollar amount.
Customer margin
Standard
Model
Custom
Design
20
3
1
3
0
3
26.35
28.00
$ 1,850
$ 2,400
$ 564
$ 634