Question of 13 - / 15 !! II View Policies Current Attempt in Progress Coronado Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year, Residential $480,000 Revenues Direct materials costs Direct labor costs Overhead costs Operating income (loss) Commercial $316,250 $30,000 120,000 86,250 236,250 $80,000 $50,000 280,000 175,000 505,000 $125,000) The controller, Pesey Kingman, is concerned about the residential product line, She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company ofhce, 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. Here are the three activity cost pools and related information she developed Activity Cost Pools Scheduling and travel Setup time Supervision Estimated Overhead $86,250 135,000 40,000 Cost Drivers Hours of travel Number of setups Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 500 250 (1) Question of 13 - / 15 !! II View Policies Current Attempt in Progress Coronado Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year, Residential $480,000 Revenues Direct materials costs Direct labor costs Overhead costs Operating income (loss) Commercial $316,250 $30,000 120,000 86,250 236,250 $80,000 $50,000 280,000 175,000 505,000 $125,000) The controller, Pesey Kingman, is concerned about the residential product line, She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company ofhce, 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. Here are the three activity cost pools and related information she developed Activity Cost Pools Scheduling and travel Setup time Supervision Estimated Overhead $86,250 135,000 40,000 Cost Drivers Hours of travel Number of setups Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 500 Setup time 500 250 (1)
