Pixel 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 in movies. The young founders of the company have become increasingly concerned with the economics of the businessparticularly since many competitors have sprung up recently in the local area. To help understand the company's cost structure, an activity-based costing system has been designed. Three major activities are carried out in the company: animation concept, animation production, and contract administration. The animation concept activity is carried out at the contract proposal stage when the company bids on projects. This is an intensive activity that involves individuals from all parts of the company in creating story boards and prototype stills to be shown to the prospective client. Once a project is accepted by the client, the animation goes into production and contract administration begins. Almost all of the work involved in animation production is done by the technical staff, whereas the administrative staff is largely responsible for contract administration. The activity cost pools and their activity measures are listed below: Activity Cost Pool Activity Measure Activity Rate Animation concept Number of proposals $6,940 per proposal Animation production Minutes of completed animation $8,780 per minute Contract administration Number of contracts $7,440 per contract These activity rates include all of the company's costs, except for the costs of idle capacity and organization-sustaining costs. There are no direct labor or direct materials costs. Preliminary analysis using these activity rates has indicated that the local commercial segment of the market may be unprofitable. This segment is highly competitive. Producers of local commercials may ask three or four companies like Pixel Studio to bid, which results in an unusually low ratio of accepted contracts to bids. Furthermore, the animation sequences tend to be much shorter for local commercials than for other work. Since animation work is billed at fairly 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:

Activity Measure Local Commercials Number of proposals 26 Minutes of completed animation 9 Number of contracts 5 The total sales from the 5 contractors for local commercials amounted was $290,000. In addition, the company has provided the following details concerning its activity rates: Activity Rates Animation Concept Animation Production Contract Administration Technical staff salaries $ 4,500 $ 5,400 $ 1,700 Animation equipment depreciation 650 2,300 0 Administrative wages and salaries 1,200 160 5,500 Supplies costs 400 500 120 Facility costs 190 420 120 Total $ 6,940 $ 8,780 $ 7,440 Management has provided the following ease of adjustment codes for the various costs: Ease of Adjustment Code Technical staff salaries Red Animation equipment depreciation Red Administrative wages and salaries Yellow Supplies costs Green Facility costs Red These codes created some controversy. In particular, some administrators objected to coding their own salaries Yellow, while the technical staff salaries were coded Red. However, the founders of the firm overruled these objections by pointing out that "our technical ACC 5250 Managerial Accounting for Decision Chris Scaria Making: Fall, 2020 Online 12/14/2020 Module 5 Homework https://ezto.mheducation.com/hm.tpx?_=0.7968879538053946_160795636176