CH7 HW 4 Thermal Rising Inc makes paragliders for sale throu

CH7 HW 4 Thermal Rising, Inc, makes paragliders for sale through specialty sporting goods stores. The company has a ty 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: points direct s 198 per order s 264 per custon deaign ord@? ice 420 per customer Outfitters, which has ordered the following Management would like an analysis of the products over the last 12 months: Model Design of gliders 15 Number of orders Number of eustom designs Direct labor-houra per glider Selling price per glider 27.50 31.00 s 1,675 $2,300 The company\'s direct labor rate is $16 per hour Using the company\'s activity-based costing system, compute the customer margin of Big Sky Outfitters. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.)

Solution

Answers

Working #1: Allocation to Standard Model

Activity Rate

No. of cost drivers

Overhead cost allocated

Supporting direct labor cost

$                                     20.00

412.5

$                       8,250.00

Order Processing cost

$                                   198.00

1

$                           198.00

Customer design processing cost

$                                   264.00

0

$                                    -  

Customer Services

$                                   420.00

1

$                           420.00

Total Cost Allocated

$                       8,868.00

Working #2: Allocation to Customer Design

Activity Rate

No. of cost drivers

Overhead cost allocated

Supporting direct labor cost

$                                     20.00

62

$                       1,240.00

Order Processing cost

$                                   198.00

2

$                           396.00

Customer design processing cost

$                                   264.00

2

$                           528.00

Customer Services

$                                   420.00

1

$                           420.00

Total Cost Allocated

$                       2,584.00

Working #3: Sales - Cost = Margin

Working

Standard Model

Customer Design

Total

A

Sale price per unit

$                               1,675.00

$                 2,300.00

B

No. of gliders

15

2

C=A x B

Amount of Sales Revenue

$                             25,125.00

$                 4,600.00

$                     29,725.00

D

Direct Material cost per unit

$                                   468.00

$                     576.00

E=B x D

Total Material cost

$                               7,020.00

$                 1,152.00

$                       8,172.00

F = Working #1 & #2

Total Overhead allocated as per ABC method

$                               8,868.00

$                 2,584.00

$                     11,452.00

G = C - E - F

Margin

$                               9,237.00

$                     864.00

$                     10,101.00

Answer

Customer Margin

$                     10,101.00

Working #1: Allocation to Standard Model
	Activity Rate	No. of cost drivers	Overhead cost allocated
Supporting direct labor cost	$                                     20.00	412.5	$                       8,250.00
Order Processing cost	$                                   198.00	1	$                           198.00
Customer design processing cost	$                                   264.00	0	$                                    -
Customer Services	$                                   420.00	1	$                           420.00
Total Cost Allocated	$                       8,868.00