Sheffield 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. Commercial Residential Revenues $351,000 $456,000 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 91,000 261,000 176,000 486,000 Operating income (loss) $90,000 $(30,000) The controller, Peggy 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 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. Here are the three activity cost pools and related information she developed: Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $91,000 Hours of travel Setup time 96,000 Number of setups Supervision 80,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 750 550 Setup time 550 250 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 0.38.) Scheduling and travel $ +A Setup time Supervision Overhead Rates 70 per hour $ 120 per setup A 2 per dollar Determine the overhead cost assigned to each product line. Scheduling and travel Setup time Supervision Total cost assigned +A Commercial 52500 66000 +A +A $ 280000 $ A Residential 38500 30000 520000 398500 $ 588500 Compute the operating income for each product line, using the activity-based overhead rates. Operating income (loss) Commercial Residential 217500 447500