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 $295,000 $475,000 Direct materials costs $29,000 $49,000 Direct labor costs 99,000 287,500 Overhead costs 80,000 208,000 149,000 485,500 Operating income (loss) $87,000 $(10,500) 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 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. Here are the three activity cost pools and related information she developed: Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $80,000 Hours of travel Setup time 99,000 Number of setups Supervision 50,000 Direct labor cost Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 350 200 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Scheduling and travel $ Setup time $ Supervision % Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.) Commercial Residential Scheduling and travel $ $ Setup time $ $ Supervision $ $ Total cost assigned $ $ eTextbook and Media Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.) Operating income (loss) Commercial $ Residential $

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 $295,000 $475,000 Direct materials costs $29,000 $49,000 Direct labor costs 99,000 287,500 Overhead costs 80,000 208,000 149,000 485,500 Operating income (loss) $87,000 $(10,500) 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 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. Here are the three activity cost pools and related information she developed: Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $80,000 Hours of travel Setup time 99,000 Number of setups Supervision 50,000 Direct labor cost Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 350 200 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Scheduling and travel $ Setup time $ Supervision % Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.) Commercial Residential Scheduling and travel $ $ Setup time $ $ Supervision $ $ Total cost assigned $ $ eTextbook and Media Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.) Operating income (loss) Commercial $ Residential $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 4CE: Foy Company has a welding activity and wants to develop a flexible budget formula for the activity....

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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		$295,000		$475,000
Direct materials costs	$29,000		$49,000
Direct labor costs	99,000		287,500
Overhead costs	80,000	208,000	149,000	485,500
Operating income (loss)		$87,000		$(10,500)

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 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. Here are the three activity cost pools and related information she developed:

Activity Cost Pools	Estimated Overhead		Cost Drivers
Scheduling and travel		$80,000		Hours of travel
Setup time		99,000		Number of setups
Supervision		50,000		Direct labor cost

Expected Use of Cost Drivers per Product
	Commercial		Residential
Scheduling and travel		750		500
Setup time		350		200

Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.)

	Overhead Rates
Scheduling and travel	$
Setup time	$
Supervision		%

Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.)

	Commercial	Residential
Scheduling and travel	$	$
Setup time	$	$
Supervision	$	$
Total cost assigned	$	$

eTextbook and Media

Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.)

		Operating income (loss)
Commercial		$
Residential		$

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