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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 Cost Drivers
Estimated Overhead
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
Residential
Commercial
Scheduling and travel 750 500
Setup time 350 250
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 :