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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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