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almond37 [142]
3 years ago
6

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 designing 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 Design Custom Model
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.

Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.
Business
1 answer:
Dafna11 [192]3 years ago
5 0

Answer:

$1,144

Explanation:

According to the scenario, computation of the given data are as follow:-

Particular  Amount ($)

Sales 44,200

Less-Direct material cost of grinder 13,182

Less-Direct labor cost 11,915

Less-Supporting direct labor 15,886

Less- Order processing 1,136

Less-customer service 379

Less- Custom designing 558

Margin of customer of big sky outfitters 1,144

Working notes

1 . Sales = Selling Price Per Grinder × No. of Grinder

= $1,850 × 20 + $2,400  × 3

= $37,000 + $7,200

= $44,200

Direct Material Cost of Grinder = Selling Price Per Grinder × No. of Grinder

= $564 × 20 + $634 × 3

= $11,280 + $1,902

= $13,182

Direct Labor Cost = No. of Grinder × Direct Labor Hour - Per Grinder × Direct Labor Rate

= 20 × 26.35 × $19.50 + 3 × 28 × $19.50

= $10,276.5 + $1,638

= $11,914.5

Supporting Direct Labor = No. of Grinder × Direct Labor Hour-Per Grinder × Supporting Direct Labor Per Direct Labor-Hour

=20 × 26.35  × $26 + 3 × 28 × $26

= $13,702 + $2,184

= $15,886

Order Processing = Total No. of Order × Order Processing Per Order

= ( 1+3)  × $284

= 4 × $284

= $1,136

Custom Designing = Total No. of Custom Designing × Price Per Custom Designing

=(0+3) × $186

= $558

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Solution:

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Whoosh Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable ex
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<h3>Breakeven</h3>

1. Number of cartons

Number of cartons=fixed expenses/contribution margin per carton

Number of cartons=1095000/(16.5-6.5)

Number of cartons=109500

2.  Target sales in dollars

Contribution margin ratio=contribution margin per carton/sales price per carton =

Contribution margin ratio=(16.5-6.5)/16.5

Contribution margin ratio=.61

Target sales in dollars=(fixed expenses + target operating income)/ contribution margin ratio

Target sales in dollars=(1095000+312000)/.61

Target sales in dollars=2,306,557

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Sales revenue 7,507,500

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Cost of goods sold 5,105,100

(6.50x455,000x68%)

Operating expenses 2,402,400

(6.50x455,000x32%)

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Fixed expenses 1095000

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4. Margin of safety​ (in dollars)

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Margin safety in dollars=7,507,500-(16.5x109500)

Margin safety in dollars=7,507,500-1,806,750

Margin safety in dollars=5,700,750

Operating leverage factor =Contribution margin/operating income

Operating leverage factor =4,550,000/3,455,000

Operating leverage factor =1.316

Operating leverage factor =1.32 (Approximately)

5.  Operating income

Operating income increase=Sales volume x operating leverage factor

Operating income increase=11%x1.32

Operating income increase=.1452

New volume=Original volume + increase in volume

{[455,000+45,500 x(16.5-6.5)]-1095000}-3,455,000

=[500,500x10)-1095000]-3,455,000

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=455,000

455,000/3,455,000

=0.132

Inconclusion the number of cartons of calendars that Fast Spirit Calendars must sell each month to breakeven is 109500.

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Evaluation of alternatives: the customer chooses among the goods or services that could meet his needs.

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The observable artifact the organization is using is that of symbols.

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