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Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the
Venus 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 $300,700 $483,000 Revenues Direct materials costs Direct labor costs Overhead costs Operating income (loss) $29.500 100,400 90.900 $50,500 289,500 220,800 150,000 $79.900 490,000 $17.000) 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: Estimated Overhead Cost Drivers $86,500 Activity Cost Pools Scheduling and travel Setup time Supervision Hours of travel 86.900 Number of setups Direct labor cost 67.500 Expected Use of Cost Drivers per Product Commercial Residential 940 600 Scheduling and travel Setup time 350 230 Compute the activity-based overhead rates for each of the three cost pools, (Round answers to 2 decimal places, eg, 12.25.) Overhead Rates Scheduling and travel $ Setup time Supervision %6 e Textbook and Media Determine the overhead cost assigned to each product line. (Round answers to decimal places, eg. 1,575.) Commercial Residential Scheduling and travel $ S Setup time $ $ Supervision $ $ Total cost assigned $ $ Compute the operating income for each product line, using the activity based overhead rates. (Round answers to decimal places, eg. 1,575.) Operating income (loss) Commercial $ Residential $ e Textbook and Media
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