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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 current year. Commercial Residential Revenues $357,500 $460,500 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 97,500 267.500 170,500 480,500 Operating income (loss) $90,000 S(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 $97,500 Hours of travel Setup time 110,500 Number of setups Supervision 60,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 800 700 Setup time 400 250 Your answer is partially correct. Compute the activity-based overhead rates for each of the three cost pools.

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 $357,500 $460,500 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 97,500 267.500 170,500 480,500 Operating income (loss) $90,000 S(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 $97,500 Hours of travel Setup time 110,500 Number of setups Supervision 60,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 800 700 Setup time 400 250 Your answer is partially correct. Compute the activity-based overhead rates for each of the three cost pools.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 13CE: Nashler Company has the following budgeted variable costs per unit produced: Budgeted fixed overhead...
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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 current year. Commercial Residential Revenues $357,500 $460,500 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 97,500 267,500 170,500 480,500 Operating income (loss) $90,000 $(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 $97,500 Hours of travel Setup time 110,500 Number of setups Supervision 60,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 800 700 Setup time 400 250 Your answer is partially correct. Compute the activity-based overhead rates for each of the three cost pools. Overhead Rates Scheduling and travel per hour 65 Setup time %24 170 per setup Supervision 0.15
Transcribed Image Text: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 $357,500 $460,500 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 97,500 267,500 170,500 480,500 Operating income (loss) $90,000 $(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 $97,500 Hours of travel Setup time 110,500 Number of setups Supervision 60,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel 800 700 Setup time 400 250 Your answer is partially correct. Compute the activity-based overhead rates for each of the three cost pools. Overhead Rates Scheduling and travel per hour 65 Setup time %24 170 per setup Supervision 0.15
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