# Exercise 4-1 (part level submission) wilkins inc. has two types

 Exercise 4-5 (Part Level Submission)

Shady Lady sells window coverings (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.

 Commercial Residential Revenues \$298,600 \$477,500 Direct material costs \$29,000 \$50,500 Direct labor costs 114,000 298,000 Overhead costs 81,800 224,800 149,200 497,700 Operating income (loss) \$73,800 (\$20,200 )

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 \$106,800 Hours of travel Setup time 74,760 Number of setups Supervision 49,440 Direct labor cost

 Expected Use of Cost Drivers per Product Commercial Residential Scheduling and travel 1,070 535 Setup time 420 300

 (a)

Compute the activity-based overhead rates for each of the three cost pools. (Round the supervision overhead rate to 2 decimal places, e.g. 12% and all other answers to 2 decimal places, e.g. \$12.25.)

 Overhead Rate Scheduling and travel \$[removed] Setup time \$[removed] Supervision [removed] %

 (b)

Determine the overhead cost assigned to each product line. (Round Overhead Rate to 2 decimal places, 15.25 and final answers to 0 decimal places, e.g. \$2,512.)

 Commercial Residential Scheduling and travel \$[removed] \$[removed] Setup time \$[removed] \$[removed] Supervision \$[removed] \$[removed] Total assigned costs \$[removed] \$[removed]

 (c)

Compute the operating income for each product line, using the activity-based overhead rates. (Round answers to 0 decimal places, e.g. \$2,512.)

 Commercial Residential Operating income \$[removed] \$[removed]

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