Question 7 of 15 1/2 III Shady Lady sells window coverings to both commercial and residential customers. The following information relates to its budgeted operations for the current year: Commercial $ 300,000 Residential $ 480,000 Revenues Direct material costs Direct labour costs Overhead costs Operating income (loss) $ 30,000 100.000 55,000 $70,000 300,000 162,000 185,000 $ 115,000 532,000 $(52,000) The controller, Susan Chan, is concerned about the residential product line. She cannot understand why this line is not more profitable given that window coverings are less complex to install for residential customers. In addition, the residential client base resides close to the company office, so travel costs are not as expensive on a per-client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Following are the three activity cost pools and related information she developed: Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $ 85,800 Hours of travel Set-up time 75,640 Number of set-ups Supervision Direct labour cost 55,560 Question 7 of 15 1/2 Estimated Use of Cost Drivers per Product Commercial Residential 900 660 390 220 Scheduling and travel Set-up time (a) Your Answer Correct Answer Your answer is correct Calculate the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line. (Round overhead rate for supervision to 2 decimal places, eg, 15.25%.) Overhead rates Scheduling and travel 55 per travel hour Question 7 of 15 1/2 E Calculate the activity based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line. (Round overhead rate for supervision to 2 decimal places, eg. 15.25%.) Overhead rates Scheduling and travel $ 55 per travel hou Set-up time $ per set-up Supervision 13.89 % of direct labour cost 124 Commercial Residential Total overhead costs applied S 111750 $ 105250 e Textbook and Media Solution Attempts: 3 of 3 used Question 7 of 15 > 1/2 II! e Textbook and Media Solution Attempts: 3 of 3 used (b) Calculate the operating income for each product line using the activity-based overhead rates. (Enter negative amounts using a negative sign preceding the number eg.-45. Round answers to decimal places, eg. 1.525.) Commercial Residential Operating income (loss) $ $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit
