E5.21 (LO 1, 2, 4) Shady Lady sells window coverings to both commercial and residential customers. The following information relates to its budgeted operations for the current year: Revenues Commercial $300,000 Residential $480,000 Direct material costs Direct labour costs Overhead costs $ 30,000 100,000 55,000 $ 70,000 300,000 Operating income (loss) 185,000 $115,000 162,000 532,000 $(52,000) The controller, Susan Chan, is concerned about the residential product line. She cannot understand why this line is not more profitable given that window coverings are less complex to install for resi- dential customers. In addition, the residential client base resides close 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. Following are the three activity cost pools and related information she developed:

E5.21 (LO 1, 2, 4) Shady Lady sells window coverings to both commercial and residential customers. The following information relates to its budgeted operations for the current year: Revenues Commercial $300,000 Residential $480,000 Direct material costs Direct labour costs Overhead costs $ 30,000 100,000 55,000 $ 70,000 300,000 Operating income (loss) 185,000 $115,000 162,000 532,000 $(52,000) The controller, Susan Chan, is concerned about the residential product line. She cannot understand why this line is not more profitable given that window coverings are less complex to install for resi- dential customers. In addition, the residential client base resides close 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. Following are the three activity cost pools and related information she developed:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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