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.
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 $ 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
Residential
Scheduling and travel 750 500
Setup time 350 250