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 $ 16 per direct labor-hour Order processing $ 192 per order Custom design processing $ 256 per custom design Customer service $ 420 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 16 3 Number of orders 2 3 Number of custom designs 0 3 Direct labor-hours per glider 29.50 34.00 Selling price per glider $ 1,675 $ 2,320 Direct materials cost per glider $ 464 $ 586 The company’s direct labor rate is $20 per hour. Required: 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.)

	Customer margin $

Answer 1

Data is very scattered, I tried to understand the text and formatted in table below:
Activity Cost Pool Activity Rate
Supporting Direct Labour	$16 per direct Labour Hour
Order Processing	$192 per order
Custom design processing	$256 per customer design
Customer Service	$420 per Customer
Customer, Big Sky Outfitterd
	Standard Model	Customer Design
No. of Gliders (Units)	16	3
No. of Orders	2	3
No. of Custom Designs	0	3
Direct Labour Hours per glider	29.5	34
Selling Price per glider	$1675	$2320
Direct material cost per glider	$464	$586
Direct Labour Rate is $20 per hour
Solution is as follows:
	Standard Model	Customer Design	Total
Units	16	3
Sale Price	$1675	$2320
Sales			33,760
=$1675*16	26,800
=$2320*3		6,960
Less.
Material Cost			9,182
=464*16	7,424
=586*3		1,758
Labour Cost			11,480
=29.5*16*20	9,440
=34*3*20		2,040
Ordering Cost			960
=2*192	384
=3*192		576
Custom Design processing Cost			768
=0*256	-
=3*256		768
Customer Service Cost			420
Total Cost			22,810
Contribution			10,950
Labour Cost calculated on the required number of hours @ $20 per labour hour. Under Activity Cost, Labour cost mentioned at $16 per hour must be some typo. As Labour Cost doesn't come under Overhead Cost, i.e. Activity Costs bifurcation. If you still consider it in cost additionally $16 per labour hour, Contribution would be $10,950 - $9,184 = $ 1,766