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Activity Cost Pools
Drivers
Scheduling and travel
Hours of travel
Estimated Overhead
Cost
$85,000
Setup time
setups 90,000 Number of
Supervision
cost 60,000 Direct labor
Expected Use of Cost Drivers per Product
Commercial
Scheduling and travel
500
Setup time
Residential
750
350
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?
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ACC 560 Week 4 DQ The Cost of Complexity