Updraft Systems, 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 |
$ |
20 |
per direct labor-hour |
| Order processing |
$ |
182 |
per order |
| Custom designing |
$ |
251 |
per custom design |
| Customer service |
$ |
422 |
per customer |
|
|
Management would like an analysis of the profitability of a particular customer, Eagle Wings, which has ordered the following products over the last 12 months:
|
|
Standard
Model |
Custom
Design |
| Number of gliders |
|
14 |
|
2 |
| Number of orders |
|
2 |
|
2 |
| Number of custom designs |
|
0 |
|
2 |
| Direct labor-hours per glider |
|
29.50 |
|
33 |
| Selling price per glider |
$ |
1,650 |
$ |
2,330 |
| Direct materials cost per glider |
$ |
448 |
$ |
566 |
|
| The company's direct labor rate is $22 per hour. |
| Required: |
|
Using the company's activity-based costing system, compute the customer margin of Eagle Wings.
|