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(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

(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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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(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:(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
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
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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