Problem 7-19 (Static) Second Stage Allocations and Product Margins [LO7-4, LO7-5] Check my work Pixel Studio, Incorporated, is a small company that creates computer-generated animations for films and television. Much of the company's work consists of short commercials for television, but the company also does realistic computer animations for special effects in movies. The young founders of the company have become increasingly concerned with the economics of the business-particularly since many competitors have sprung up recently in the local area. To help understand the company's cost structure, an activity-based costing system has been designed. Three major activities are carried out in the company: animation concept, animation production, and contract administration. The animation concept activity is carried out at the contract proposal stage when the company bids on projects. This is an intensive activity that involves individuals from all parts of the company in creating story boards and prototype stills to be shown to the prospective client. Once a project is accepted by the client, the animation goes into production and contract administration begins. Almost all of the work involved in animation production is done by the technical staff, whereas the administrative staff is largely responsible for contract administration. The activity cost pools and their activity measures are listed below: Activity Cost Pool Animation concept Animation production Activity Measure Activity Rate Number of proposals Minutes of completed animation Number of contracts $ 6,040 per proposal $ 7,725 per minute $6,800 per contract Contract administration These activity rates include all of the company's costs, except for its organization-sustaining costs and idle capacity costs. There are no direct labor or direct materials costs.