Refer to the data for Pixel Studio, Inc., in Problem 8—18. In addition, the company has provided the following details concerning its activity rates:

Management has provided the following ease of adjustment codes for the various costs:

These codes created some controversy. In particular, some administrators objected to coding their own salaries Yellow, while the technical staff salaries were coded Red. However, the founders of the firm overruled these objections by pointing out that “our technical staff is our most valuable asset. Good animators are extremely difficult to find, and they would be the last to go if we had to cut back.”

Required:

1.         Using Exhibit 8A—3 as a guide, determine the cost of the local commercials market. (Think of the local commercial market as a product.)

2.         Using Exhibit 8A—5 as a guide, prepare an action analysis report concerning the local commercial market. (This company has no direct materials or direct labor costs.)

3.         What would you recommend to management concerning the local commercial market?

Activity Rates Animation Animation Contract Production Administration Concept $4,000 $6,000 $1,600 Technical staff salaries Animation equipment depreciation 360 1,125 Administrative wages and salaries 1,440 150 4,800 120 Supplies costs 300 160 Facility costs 120 150 240 $6,040 $7,725 $6,800 Total