Updraft Systems. Inc. makes paragliders for sale through specialty sporting goods stores. The...


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 PoolActivity Rate
Supporting direct labor$18 per direct labor-hour
Order processing$188 per order
Custom designing$266 per custom design
Custom service$422 per customer

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 ModelCustom Design
Number of gliders133
Number of orders13
Number of customer designs03
Direct labor-hours per glider30.5032.00
Selling price per glider$1,625$2,320
Direct materials cost per glider$460$580

The company's direct labor rate is $20 per hour


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

Customer margin _____

Activity-Based Costing to Evaulate Client Margins:

In activity-based costing, the cost per activity for a range of business processes is calculated and used to allocate overhead costs to separate products or clients and/or evaluate the profitability of each.

Answer and Explanation: 1

Become a member to unlock this answer!

View this answer

The overhead cost assigned to Eagle Wings is:

Activity Cost Pool Activity Rate Cost Drivers consumed Cost allocated
Supporting direct labor $ 18...

See full answer below.

Learn more about this topic:

The Seven Steps of Activity-Based Costing


Chapter 7 / Lesson 3

Activity-based costing takes into account the activities needed to complete products, including the associated costs of each activity. Discover the seven steps of activity-based costing and learn how it is used in organizations.

Related to this Question

Explore our homework questions and answers library