Commercial Residential Revenues $342,800 $455,000 Direct materials costs $45,000 $50,000 Direct labor costs 140,000 260,000 Overhead...

Transcribed Image Text:

Commercial Residential Revenues $342,800 $455,000 Direct materials costs $45,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 92,800 277,800 165,000 475,000 Operating income (loss) $65,000 $(20,000) 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 Scheduling and travel Estimated Overhead Cost Drivers $92,800 Hours of travel Setup time 105,000 Number of setups Supervision 60,000 Direct labor cost Commercial Residential Revenues $342,800 $455,000 Direct materials costs $45,000 $50,000 Direct labor costs 140,000 260,000 Overhead costs 92,800 277,800 165,000 475,000 Operating income (loss) $65,000 $(20,000) 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 Scheduling and travel Estimated Overhead Cost Drivers $92,800 Hours of travel Setup time 105,000 Number of setups Supervision 60,000 Direct labor cost