FINANCIAL ACCOUNTING
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Author: Libby
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Transcribed Image Text:(b)
Calculate the operating income for each product line using the activity-based overhead rates. (Enter negative amounts using a
negative sign preceding the number e.g. -45. Round answers to 0 decimal places, e.g. 1,525.)
Operating income (loss) $
Commercial
$
Residential
Transcribed Image Text:Carla Vista sells window coverings to both commercial and residential customers. The following information relates to its budgeted
operations for the current year:
Revenues
Direct material costs
Direct labour costs
Overhead costs
Operating income (loss)
Activity Cost Pools
Scheduling and travel
Set-up time
Supervision
$30,000
100,000
Scheduling and travel
Set-up time
55,000
Commercial.
$ 300,000
185,000
$115,000
The controller, Sharon Lee, is concerned about the residential product line. She cannot understand why this line is not more profitable
given that window coverings are less complex to install for residential customers. In addition, the residential client base resides close
to the company office, so travel costs are not as expensive on a per-client visit 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. Following are the three activity cost pools and related information she developed:
Estimated Overhead
$85,800
75,640
55,560
$70,000
300,000
162,000
Residential
$ 480,000
Use of Cost
Drivers per Product
Commercial Residential
900
660
390
220
Cost Drivers
Hours of travel
Number of set-ups
Direct labour cost
532,000
$(52,000
HARUMAH se developed
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