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 business?particularly 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:

Required: 1. Calculate the cost of serving the local commercial market. 2. Calculate the margin earned serving the local commercial market. (Remember, this company has no direct materials or direct labor costs.) Complete this question by entering your answers in the tabs below. Required 1 Requiredz Calculate the margin earned serving the local commercial market. (Remember, this company has no direct materials or direct labor costs.) ( Required 1 Local Activity Measure Commercials Number of proposals 24 Minutes of completed animation 11 Number of contracts 5Activity Cost Pool Activity Measure Activity Rate Animation concept Number of proposals $6,000 per proposal Animation production Minutes of completed animation $8,500 per minute Contract administration Number of contracts $5,800 per contract