Question

Updraft Systems, 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 manufacturing
$18 per direct labor-hour

Order processing
$184 per order

Custom designing
$255 per custom design

Customer service
$426 per customer

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Management would like an analysis of the profitability of a particular customer, Eagle Wings, which has ordered the following products over the last 12 months:

Standard Model : Custom Design

Number of gliders 13 : 3

Number of orders 2 : 3

Number of custom designs 0 : 3

Direct labor-hours per glider 29.50 : 32

Selling price per glider $1,725 : $2,350

Direct materials cost per glider $478 : $576

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The company's direct labor rate is $18 per hour.

Using the company's activity-based costing system, compute the customer margin of Eagle Wings.