Question

CALCULATOR PRINTER VERSION BACH Exercise 4-14 a1-a2, b (Video) Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. Commercial Residential Revenues $300,000 5480,000 Direct materials costs $30,000 $50,000 Direct labor costs 100,000 300,000 Overhead costs 85,000 215,000 150.000 500.000 Operating income (loss) 585,000 ${20,000) The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client vist for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed Estimated Activity Cost Poole Overhead Cost Drivers Scheduling and travel $85,000 Hours of travel Setup time 90,000 Number of setups Supervision 60,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 350 250 Your answer is partially correct. Try again. Compute the activity based overhead rates for each of the three cost pools. (Round overhead rate for supervision to 2 decimal places, e., 0.38.) Overhead Rates CSearch or type URL . 1 3 4 5 6 7 8 9 o E R Т. Y 0 Р D F G H K C B N. M

Answer 1

Activity	Cost	Cost Driver		Overhead rate
Scheduling and Travel	$          85,000	1250	Hours	$             68.00
Setup Time	$          90,000	600	Setups	$           150.00
Supervision	$          60,000	400000	Labor cost	$               0.15

	Commercial	Residential
Overhead
Scheduling and Travel	$          51,000	$       34,000
Setup Time	$          52,500	$       37,500
Supervision	$          15,000	$       45,000
Total Overhead Assigned	$        118,500	$     116,500

	Commercial	Residential
Revenues	$        300,000	$     480,000
Costs
Direct Material	$          30,000	$       50,000
Direct Labor	$        100,000	$     300,000
Overhead	$        118,500	$     116,500
Total Cost	$        248,500	$     466,500
Operating Income	$          51,500	$       13,500

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