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.

Direct materials $ 9,600 $ 21,600 $ 31,200
Direct labor 6,000 11,900 17,900
Overhead (300% of direct labor cost) 18,000 35,700 53,700
Total cost $ 33,600 $ 69,200 $ 102,800
Quantity produced 10,400 ft. 14,000 ft.
Average cost per ft. (rounded) $ 3.23 $ 4.94

  
Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $53,700 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 $ 2,148
Depreciation of machinery 28,680
Assembly line preparation 22,872
Total overhead $ 53,700

  
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 ($) $ 6,000 $ 11,900 $ 17,900
Depreciation of machinery Machine hours 200 hours 700 hours 900 hours
Assembly line preparation Setups (number) 30 times 95 times 125 times

  
Required:

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
0 0
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Answer #1

drivers of direct Labor cost edge 1. Assign these three overhead cost Pools to each of the two products using ABC Overhead Ac2. Determine average cost per foot for each of the two Products using ABC Rounded squared edge edge Total direct material cosOverhead assigned = Activity Rate & Activity driver incurred Supervision & Rounded edge) = 12% x $6,000 & $720 Depreciation o

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