Second-Stage Allocations and Product Margins
Refer to the data for AnimPix, Inc., in Problem 7-16. In addition, the company has provided the following details concerning its activity rates:
| Activity Rates | ||
| Animation Concept | Animation Production | Contract Administration |
Technical staff salaries | $3,500 | $5,000 | $1,800 |
Animation equipment depreciation | 600 | 1,500 | 0 |
Administrative wages and salaries | 1,400 | 200 | 4,600 |
Supplies costs | 300 | 600 | 100 |
Facility costs | 200 | 400 | 100 |
Total | $6,000 | $7,700 | $6,600 |
Management has provided the following ease of adjustment codes for the various costs:
| Ease of Adjustment Code |
Technical staff salaries | Red |
Animation equipment depreciation | Red |
Administrative wages and salaries | Yellow |
Supplies costs | Green |
Facility costs | Red |
These codes created some controversy. In particular, some administrators objected to coding their own salaries Yellow, while the technical staff salaries were coded Red. However, the founders of the firm overruled these objections by pointing out that “our technical staff is our most valuable asset. Good animators are extremely difficult to find, and they would be the last to go if we had to cut back.”
Required:
I. Using Exhibit 7A- 3 as a guide, determine the cost of the local commercials market. (Think of the local commercials market as a product.)
2. Using Exhibit 7A-5 as a guide, prepare an action analysis report concerning the local commercials market. (This company has no direct materials or direct labor costs.)
3. What would you recommend to management concerning the local commercials market?
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