Homework #6 savec Problem 7-19 Second Stage Allocations and Product Margins [LO7-4, LO7-5] 9 Plxel Studio, Inc., Is a small company that creates computer-generated animations for films and television. Much of the company's work consists of short commercials for television, but the company also does realistic computer animations for special effects movies The young founders of the company have become Increasingly concerned with the economics of the business-particularly since o help understand the company's cost structure, an activity-based costing system has been deslgned. Three major actlvitles are carrled out In the company: animation concept, animation productlon, and contract administration. The animation concept activity Is carried out at the contract proposal stage when the company bids on e stills many competitors have sprung up recently in the local area. points to be shown to the prospective client, Once a prolect is accepted by the clent, the animation goes into production and contract administration begins. Almost staff is largely responsible for contract administration. The activity cost pools and their activity measures are listed below |l of the work Involved animatlon production Is done by the technical staff, whereas the administrative eBook Activity Cost Pool Activity Rate $5,600 Activity Measure Number of proposals Animation concept per proposal Reforences anination gher nf contracts. Contract administration $6.888 na These activity rates Include all of the company's costs, except for Its organization-sustaining costs and Idle capacity cOsts. There are no t labor Irect materia Preliminary analysis using these activity rates has Indicated that the local commerclal segment of the market may be unprofitable. This segment is highly competitive. Producers of local commercials may ask three or four companles like Pixel Studio to bid, which results Tr commercials than for other work. Since animation work is billed at falrly standard rates according to the running time of the completed animation, this means that the revenues from these short projects tend to be below average. Data concerning activity In the local commercial market appear below: Local Commercials Activity Measure uiqutes of completed anination 18 Number of contracts The total sales from the 9 contracts for local commerclals was $200,000. Required: 1. Calculate the cost of serving the local commercial market. 2. Calculate the margin earned serving the local commerclal market. (Remember, this company has no direct materlals or direct labor costs.) Complete this question entering your answers in the tabs below. Required 1 Required 2 Calculate the cost of serving the local commercial market. Cost of serving Required 2 Required 1 Mc