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:

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	$	26	per direct labor-hour
Order processing	$	284	per order
Custom design processing	$	186	per custom design
Customer service	$	379	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		20		3
Number of orders		1		3
Number of custom designs		0		3
Direct labor-hours per glider		26.35		28.00
Selling price per glider	$	1,850	$	2,400
Direct materials cost per glider	$	564	$	634

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.

Big Sky Outfitters Customer Margin—Activity-Based Costing
Sales ($1,850 per standard model glider × 20 standard model gliders + $2,400 per custom designed glider × 3 custom designed gliders)			$	44,200
Costs:
Direct materials ($564 per standard model glider × 20 standard model gliders + $634 per custom designed glider × 3 custom designed gliders)	$	13,182
Direct labor ($19.50 per direct labor-hour × 26.35 direct labor-hours per standard model glider × 20 standard model gliders + $19.50 per direct labor-hour × 28 direct labor-hours per custom designed glider × 3 custom designed gliders)		11,915
Supporting direct labor ($26 per direct labor-hour × 26.35 direct labor-hours per standard model glider × 20 standard model gliders + $26 per direct labor-hour × 28 direct labor-hours per custom designed glider × 3 custom designed gliders)		15,886
Order processing ($284 per order × 4 orders)		1,136
Custom design processing ($186 per custom design × 3 custom designs)		558
Customer service ($379 per customer × 1 customer)		379		43,056
Customer margin			$	1,144