Business, 08.04.2021 23:00 msab3253

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 $328,000 $514,000
Direct materials costs $45,000 $50,000
Direct labor costs 110,000 290,000
Overhead costs 108,000 263,000 199,000 539,000
Operating income (loss) $65,000 $(25,000)

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 $108,000 Hours of travel
Setup time 119,000 Number of setups
Supervision 80,000 Direct labor cost

Estimated Use of Cost Drivers per Product

Commercial Residential
Scheduling and travel 800 550
Setup time 450 250

Required:
a. Compute the activity-based Overhead rates for each Of the three cost.
b. Determine the overhead cost assigned to each product line.

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