ACC 560 ABC Question E4-14 WEEK 3 HOMEWORK CHAPTER 4 ACTIVITY BASED ACCOUNTING.

I am struggling with question a) and question b) for the Supervision category only based on direct labor cost for the cost driver?

I am coming up with supervision 60,000/ direct labor costs of (100k+300k)= 15% but then do I take 15% and multiply it by 100k under commercial for 15,000 and then 15% and multiply 300,000 under residential for 45,000 (direct labor costs).

I feel I am missing a step or there's a trick question here because it involves direct labor. I need the work done out if this is not correct. Other students have a different answer, but I am unsure if they are correct because I do not see how they came to 22,500 under residential for supervision. I used direct labor costs and multiplied by 15%...not the over head costs of 150,000. I used direct labor costs for supervision.

Please help because I cannot seem to have a different outcome.

E4-14 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. Assign overhead using traditional costing and ABC. (LO 4), AP 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: Commercial Residential

Revenues $300,000 $480,000-

Direct materials costs $ 30,000 $ 50,000

Direct labor costs 100,000 300,000

Overhead costs 85,000 215,000 150,000 500,000

Operating income (loss) $ 85,000 ($ 20,000)

Activity Cost Pools Estimated Overhead Cost Drivers Scheduling and travel $85,000 Hours of travel , Setup time 90,000 Number of setups, Supervision 60,000 Direct labor cost. Expected Use of Cost Drivers per Product

Commercial \Scheduling and travel 750 & residential 500 ...Setup time commercial 350 / residential 250

Instructions (a) Compute the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line. (b) Compute the operating income for each product line, using the activity-based overhead rates. (c) What do you believe Peggy Kingman should do?