Exercise 17-14 Venus Creations sells window treatments (shades, blinds, and awni

Question

Exercise 17-14 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 $300,000 $480,000 Direct materials costs Direct labor costs Overhead costs $30,000 100,000 $50,000 300,000 85,000 215,000 150,000 500,000 $(20,000) o Operating income (loss) 85,000 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: Estimated Overhead Activity Cost Pools Cost Drivers Scheduling and travel Setup time Supervision $85,000 90,000 60,000 Hours of travel Number of setups Direct labor cost Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel Setup time 750 500 350 250

Explanation / Answer

Overhead Total Activities Overhead Rates Scheduling and Travel 85000 1250 68 Setup time 90000 600 150 Supervision 60000 400000 0.15 Commercial Residential Scheduling and Travel 51000 34000 Setup time 52500 37500 Supervision 15000 45000 Total Cost Assigned 118500 116500 Commercial Residential Revenue 300000 480000 Less DM 30000 50000 Less DL 100000 300000 Less Overhead Cost 118500 116500 Operating Income 51500 13500

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.