Shady Lady sells window coverings to both commercial and residential customers.

Question

Shady Lady sells window coverings to both commercial and residential customers. The following information relates to its budgeted operations for the current year.
Commercial Residential
Revenues $300,000 $480,000
Direct material costs 30,000 50,000
Direct labor costs 100,000 300,000
Overhead costs 50,000
180,000
150,000
500,000

Operating income (loss) $120,000
($ 20,000)



The controller, Wanda Lewis, 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 to install 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 $90,000 Hours of travel
Setup time 70,000 Number of setups
Supervision 40,000 Direct labor cost


Expected Use of Cost Drivers per Product

Commercial Residential
Scheduling and travel 1,000 500
Setup time 450 250






Compute the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line. (Round overhead rates to 2 decimal places, e.g. 10.50. Round overhead assigned to 0 decimal places, e.g. 125.)
Activity-based overhead ratesScheduling and travel $
Setup time $
Supervision $


Commercial Overhead assignedScheduling and travel $
Setup time $
Supervision $


Residential Overhead assignedScheduling and travel $
Setup time $
Supervision $







Compute the operating income for the each product line, using the activity-based overhead rates.
Commercial $
Residential $

Explanation / Answer

HERE I UPLOADED THE SOLUTIONS TO NUMBER 1 AND 2, STARTS FROM PAGE 14-19: WEBSITE IS: http://www.scribd.com/doc/54393830/Ch-17-Wiley-Kimmel-Homework-Quiz

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