Bonita Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The...

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Bonita 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 $385,500 $516,000 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 130,500 300,500 256,000 566,000 Operating income (loss) $85,000 $(50,000) 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 Setup time $130,500 96,000 Hours of travel Number of setups Supervision 160,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel Setup time 800 650 550 250 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 0.38.) Overhead Rates Scheduling and travel $ per hour Setup time $ per setup Supervision $ per dollar eTextbook and Media Determine the overhead cost assigned to each product line. 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. Operating income (loss) Commercial $ Residential $ Bonita 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 $385,500 $516,000 Direct materials costs $30,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 130,500 300,500 256,000 566,000 Operating income (loss) $85,000 $(50,000) 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 Setup time $130,500 96,000 Hours of travel Number of setups Supervision 160,000 Direct labor cost Estimated Use of Cost Drivers per Product Commercial Residential Scheduling and travel Setup time 800 650 550 250 Compute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 0.38.) Overhead Rates Scheduling and travel $ per hour Setup time $ per setup Supervision $ per dollar eTextbook and Media Determine the overhead cost assigned to each product line. 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. Operating income (loss) Commercial $ Residential $

Answer rating: 100% (QA)

To compute the activitybased overhead rates for each cost pool we can use the following formula ActivityBased Overhead Rate Estimated Overhead Estimat... View the full answer