Question

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	$	22	per direct labor-hour
Order processing	$	196	per order
Custom design processing	$	252	per custom design
Customer service	$	418	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:

	Standard Model		Custom Design
Number of gliders		15		2
Number of orders		2		2
Number of custom designs		0		2
Direct labor-hours per glider		27.50		31.00
Selling price per glider	$	1,625	$	2,340
Direct materials cost per glider	$	470	$	566

The company’s direct labor rate is $16 per hour.

I have gotten 3 different answers trying to solves this (1554, 2214, 2886) any help would be great along with how you got their so maybe I can catch my mistake! Thanks!

Answer 1