kYour Work- Google Chrome o.mheducation.com/hm.tpx Pixel Studio, Inc., is a smal

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kYour Work- Google Chrome o.mheducation.com/hm.tpx Pixel Studio, Inc., is a small company that creates computer-generated animations for films and television Much of the company's work consists of short commercials for television, but the company also does realistic computer animations for special effects in movies The young founders of the company have become increasingly concemed with the economics of the business-particularly since many competitors have sprung up recently in the loc al area. To help understand the company's cost structure, an activity-based costing system has been designed. Three major activities are caried out in the company: animation concept, animation production, and contract administration. The animation conc ept activity is carried out at the contract proposal stage when the company bids on projects. This is an intensive activity that involves individuals from all parts of the company in creating story boards and prototype stills to be shown to the prospective client. Once a project is accepted by the client, the animation goes into production and contract administration begins. Almost all of the work involved in animation production is done by the technic al staff, whereas the administrative staff is largely responsible for contract administration. The activity cost pools and their activity measures are listed bellow Activity Cost Pool Activity Measure Animation conceptNumber of proposals Animation production Minutes of completed animation Contract administration Number of contracts Activity Rate 6.330 per proposal 7.410 per minute $ 6,180 per contract These activity rates include all of the company's costs, except for the costs of idle capacity and organization-sustaining costs. There are no direct labor or direct matenials costs Preliminary analysis using these activity rates has indic ated that the local commercial segment of the market may be unprofitable. This segment is highly competitive. Producers of loc all commercials may ask three or four companies like Pixel Studio to bid, which results in an unusually low ratio of accepted contracts to bids. Furthermore. the animation sequences tend to be much shorter for loc al commercials than for other work. Since animation work is billed at fairly standard rates according to the running time of the completed animation, this means that the revenues from these short projects tend to be below average. Data conceming activity in the locall commercial market appear below Activity MeasureLocal Commercials Number of proposals Minutes of animation Number of contracts The total sales from the 7 contractors for local commercials amounted was $300,000 In addition, the company has provided the following details conceming its activity rates Activity Rates Animation Animation Contract Concept Production Administration S 4,100 $4,900 $1.200 Tec hnical staff salanes Animation equipment depreciation Administrative wages and salaries Supplies costs Facility costs 1,400 1.000 4,700 310 140 Total s 6.330 $7,410$6.180 Management has provided the following ease of adjustment codes for the various costs Ease Technical staff salaies Anirnation equipment depreciation e wages and salanes Supplies costs

Explanation / Answer

The cost of serving local commercial market Activity rate Activity ABC Cost Animation concept 6330 22 139260 Animation production 7410 15 111150 Contract Administration 6180 7 43260 Activity Level 22 proposal P 15 minutes M 7 contracts   C Amount per proposal A X   Amount A*P Amount per minute B Y    Amount B*M Amount per contract D Z   Amount D*C Total X+Y+Z Techinical staff salaries 4100 90200 4900 73500 1200 8400 172100 Red Animation Equipment Depreciation 690 15180 1400 21000 0 0 36180 Red Administrative wages & salaries 1000 22000 260 3900 4700 32900 58800 Yellow Supplies Cost 330 7260 540 8100 140 980 16340 Green Facility Cost 210 4620 310 4650 140 980 10250 Red Total cost 139260 111150 43260 293670 Ans 2 Pixcel stuio Ink Analysis report of Local commercial market sales 300000 Green Cost Supplies Cost 16340 Green margin 283660 Yellow Cost Administrative wages and salaries 58800 Yellow Margin 224860 Red Cost Techinical staff salaries 172100 Animation Equipment Depreciation 36180 Facility Cost 10250 Red Margin 6330

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