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 11,900 18,000 Overhead (300% of direct labor cost) 18,300 35,700 54,000 Total cost $ 34,000 $ 69,200 $ 103,200 Quantity produced 10,700 ft. 14,100 ft. Average cost per ft. (rounded) $ 3.18 $ 4.91 Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $54,000 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 $ 2,160 Depreciation of machinery 28,840 Assembly line preparation 23,000 Total overhead $ 54,000 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 $ 11,900 $ 18,000 Depreciation of machinery Machine hours 400 hours 700 hours 1,100 hours Assembly line preparation Setups (number) 30 times 95 times 125 times Required:

Answer 1

1)	Assign these three overhead cost pools to each of the two products using ABC
Activity			overhead	Activity			Activity
			cost	Drivers			Rate
Supervision			2,160	18,000	Direct labor cost		12.00%
Depreciation of machinery			28,840	1,100	machine hours		26.22
Assembly line preparation			23,000	125	Setups		184.00
Rounded Edge		Activity rate					Activity	overhead
							driver inc	Assigned
Supervision			12.00%		Direct labor cost		6,100	732
Depreciation of machinery			26.22		machine hours		400	10487
Assembly line preparation			184.00		Setups		30	5520
								16739
Squared Edge'		Activity rate					Activity	overhead
Components							driver inc	Assigned
Supervision			12.00%		Direct labor cost		11,900	1428
Depreciation of machinery			26.22		machine hours		700	18353
Assembly line preparation			184.00		Setups		95	17480
								37261
2)					Rounded	Squared
					Edge	Edge
	Direct materials				9,600	21,600
	Direct labor				6,100	11,900
	overhead				16739	37,261
	total cost				32439	70,761
	Quantity produced				10,700	14,100
	Average cost per foot				3.03	5.02