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
Revenues				$300,000				$480,000
Direct materials costs		$30,000				$50,000
Direct labor costs		100,000				300,000
Overhead costs		85,000		215,000		150,000		500,000
Operating income (loss)				$85,000				$(20,000	)

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			$85,000			Hours of travel
Setup time			90,000			Number of setups
Supervision			60,000			Direct labor cost

Expected Use of Cost Drivers per Product
		Commercial				Residential
Scheduling and travel			750				500
Setup time			350				250

What should Peggy Kingman do?