Question

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				$ 355,500				$ 519,000
Direct materials costs		$ 30,000				$ 50,000
Direct labor costs		140,000				260,000
Overhead costs		100,500		270,500		239,000		549,000
Operating income (loss)				$ 85,000				$( 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 Scheduling and travel Setup time Supervision		Estimated Overhead $100,500 119,000 120,000				Cost Drivers Hours of travel Number of setups Direct labor cost

Estimated Use of Cost Drivers per Product

Commercial					Residential
Scheduling and travel	750					750
Setup time	450					250

Compute the activity-based overhead rates for each of the three cost pools. (Round overhead rate for supervision to 2 decimal places, e.g. 0.38.)

		Overhead Rates
Scheduling and travel		$67	per dollar
Setup time		$170	per setup
Supervision		$0.3	per dollar

Determine the overhead cost assigned to each product line.

Commercial		Residential
Scheduling and travel		$ ???????????		$

	Setup time		$		$

Supervision		$		$

Total cost assigned		$		$

Answer 1