Question

Glassworks Inc. produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current period, the company reports the following data.

  

	Rounded Edge				Squared Edge					Total
Direct materials		$	9,600			$	21,600		$	31,200
Direct labor			6,100				12,000			18,100
Overhead (300% of direct labor cost)			18,300				36,000			54,300
Total cost		$	34,000			$	69,600		$	103,600
Quantity produced			10,500	ft.			14,100	ft.
Average cost per ft. (rounded)		$	3.24			$	4.94

  

Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $54,300 of overhead costs incurred by the two product lines to see whether cost per foot would change markedly from that reported above. She has collected the following information.

  

Overhead Cost Category (Activity Cost Pool)	Cost
Supervision		$	2,172
Depreciation of machinery			29,000
Assembly line preparation			23,128
Total overhead		$	54,300

  

She has also collected the following information about the cost drivers for each category (cost pool) and the amount of each driver used by the two product lines. (Round activity rate and cost per unit answers to 2 decimal places.)

  

		Usage
Overhead Cost Category   (Activity Cost Pool)	Driver	Rounded Edge			Squared Edge			Total
Supervision	Direct labor cost ($)	$	6,100		$	12,000		$	18,100
Depreciation of machinery	Machine hours		300	hours		700	hours		1,000	hours
Assembly line preparation	Setups (number)		30	times		93	times		123	times

1. Assign these three overhead cost pools to each of the two products using ABC. Activity Overhead Cost Activity Drivers Activity Rate Supervision Direct labor cost % Depreciation of machinery Machine hours Assembly line preparation Setups Rounded edge ----------Activity rate---------- Activity driver incurred Overhead assigned Supervision % Depreciation of machinery Assembly line preparation Squared edge ----------Activity rate---------- Activity driver incurred Overhead assigned Components Supervision % Depreciation of machinery Assembly line preparation 2. Determine average cost per foot for each of the two products using ABC. Rounded edge Squared edge

Answer 1