ACC560 Week 3 Homework: Ch E4-14 Venus Creations commercial and residential cussomews. The follewing information relates to its ded operations for the curent year Commercial Revenues Direct materials costs 30,000 Direct labor costs Overhead costs Residential 5 300,000 1 50,000 4 100,000 85,000215.000 $ 85 000 300,000 150.000 5000 Operating income (loss) S 20,000) The controller, Peggy Kingman, is concened ahout the residential peobuct line. She cannot understand why this line is not more profnable given that the installations ol 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 resalt, she has decided to take a closer look at the ovwerhead costs assigned to the two product lines to deternmine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed Cost Drivers Estimated Overhead Activity Cost Pools Scheduling and travel Setup time Supervision 85,000 90,000 60,000 Hours of travel Number of sctups Direct labor co Expected Use of Cost Drivers per Product Commercial 750 350 Resideatial 500 250 Scheduling and travel Sctup time Instructions (a) Compute the activity-based overhead rates for each of the three cost pools, and deter- (b) Compute the operating income for each product line, using the activity-hased ower- (c) What do you believe Peggy Kingman should do? mine the overhead cost assigned to cach product line. head rates