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 -$26 per direct labor hour
- Order Processing- $284 per order
- Custom design processsing- $186 per custom design
- Customer Service- $379 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:
- Number of gliders 20(standard) 3(custom)
- Number of orders 1(standard) 3(custom)
- number of custom designs 0(standard) 3(custom)
- Direct labor-hours per glider 26.35(standard) 28(custom)
- selling price per glider $1,850(standard) $2,400(custom)
- Direct materials cost per glider $564(standard) $634(custom)
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.