CH7 HW 4 Thermal Rising, Inc, makes paragliders for sale through specialty sport
ID: 2401975 • Letter: C
Question
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.)Explanation / Answer
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