Evergreen Signs makes customized signs for businesses and residences.

These signs are made of wood, which the owner glues and carves by hand or with power tools. After carving the signs, he paints them or applies a natural finish.

He has a good sense of his labour and materials cost behaviour, but he is concerned that he does not have good measures of other support costs. Currently, he predicts support costs to be 60 percent of the cost of materials. Close investigation of the business reveals that $40 times the number of power tool operations is a more plausible and reliable support cost relationship.

Consider estimated support costs of the following two signs that Evergreen is making:

1. Prepare a report showing the support costs of both signs using each cost driver and showing the differences between the two.
2. What advice would you give Evergreen Signs about predicting support costs?

Transcribed Image Text:

Material cost Number of power tool operations Support cost SIGN A SIGN B $300 $150 3 6 ? ?