Oak Signs makes customized wooden 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, she paints them or applies a natural finish. She has a good sense of her labor and materials cost behavior, but she is concerned that she does not have good measures of other support costs. Currently, she predicts support costs to be 80% of the cost of materials. Close investigation of the business reveals that $45 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 Oak Signs is making: 3 Click the icon to view the estimated support costs.) Requirements 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 Oak Signs about predicting support costs? Cost driver Sign A Sign B Percent of material costs $ 160 $ 480 $ Number of power tool operations 225 270 $ Difference $ (110) $ 255 Requirement 2. What advice would you give Oak Signs about predicting support costs? power If the activity analysis is reliable, by using the current method, Oak Signs is predicting too little tool operations and is predicting too much cost for Sign B that use fewer cost for Sign A which uses more power tool operations. Sign A Sign B $ 200 $ 600 Materials cost Number of power tool operations Support cost 6 5 ? ? Print Done Based on this, the owner of Oak Signs is and is bidding the right amount on jobs that require few power tool operations overpricing and could be losing) all of its jobs overpricing (and could be losing) the jobs that require few power tool operations Click to select your answer(s) and then All parts showing Clear All Based on this, the owner of Oak Signs is and is Either way, her sign business properly pricing the jobs that require many power tool operations. underpricing and could be losing money on) all of its jobs. underpricing and could be losing money on the jobs that require many power tool operations. A Based on this, the owner of Oak Signs is and is Either way, her sign business could be more profitable if she better understood and used activity analysis to allocate support costs. will be most profitable if she continues to allocate support costs using the percent of materials as the cost driver