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 $300,700 $483,000 Direct materials costs $29,500 $50,500 Direct labor costs 100,400 289,500 Overhead costs 90,900 220,800 150,000 490,000 Operating income (loss) $79,900 $(7,000) 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 $86,500 Hours of travel Setup time 86,900 Number of setups Supervision 67,500 Direct labor cost Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 940 600 Setup time 350 230 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Scheduling and travel $ Setup time $ Supervision % eTextbook and Media Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.) Commercial Residential Scheduling and travel $ $ Setup time $ $ Supervision $ $ Total cost assigned $ $ eTextbook and Media Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.) Operating income (loss) Commercial $ Residential $

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 $300,700 $483,000 Direct materials costs $29,500 $50,500 Direct labor costs 100,400 289,500 Overhead costs 90,900 220,800 150,000 490,000 Operating income (loss) $79,900 $(7,000) 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 $86,500 Hours of travel Setup time 86,900 Number of setups Supervision 67,500 Direct labor cost Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 940 600 Setup time 350 230 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Scheduling and travel $ Setup time $ Supervision % eTextbook and Media Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.) Commercial Residential Scheduling and travel $ $ Setup time $ $ Supervision $ $ Total cost assigned $ $ eTextbook and Media Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.) Operating income (loss) Commercial $ Residential $

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		$300,700		$483,000
Direct materials costs	$29,500		$50,500
Direct labor costs	100,400		289,500
Overhead costs	90,900	220,800	150,000	490,000
Operating income (loss)		$79,900		$(7,000)

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		$86,500		Hours of travel
Setup time		86,900		Number of setups
Supervision		67,500		Direct labor cost

Expected Use of Cost Drivers per Product
	Commercial		Residential
Scheduling and travel		940		600
Setup time		350		230

Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 12.25.)

	Overhead Rates
Scheduling and travel	$
Setup time	$
Supervision		%

eTextbook and Media

Determine the overhead cost assigned to each product line. (Round answers to 0 decimal places, e.g. 1,575.)

	Commercial	Residential
Scheduling and travel	$	$
Setup time	$	$
Supervision	$	$
Total cost assigned	$	$

eTextbook and Media

Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. 1,575.)

		Operating income (loss)
Commercial		$
Residential		$

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