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EXERCISE 7-5 Product and Customer Profitability Analysis [LO7-4, L07-5] Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The com- pany 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 ........ Order processing ........ Custom design processing. Customer service ........ $26 per direct labor-hour $284 per order $186 per custom design $379 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfit- ters, which has ordered the following products over the last 12 months: Standard Model Custom Design 20 Number of gliders ......... Number of orders Number of custom designs ..... Direct labor-hours per glider ....... Selling price per glider ... Direct materials cost per glider ..... www 26.35 $1,850 28.00 $2,400 $634 $564 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.

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Jarrod Robel
Jarrod RobelLv2
26 Nov 2017
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