Question

4 Glassworks Inc. produces two types of glass shelving. rounded edge and squared edge, on the same production line. For the current period, the comparny reports the following data. Squared Edge $21,600 11,900 35,700 $ 69, 200 Total $ 31,000 17,900 53,780 Rounded Edge $ 9,480 6,000 Direct aterials Direct labor Overhead (300 of direct labor cost) ints 18,000 $33,400 $102,600 Total cost Quantity produced Average cost per ft. (rounded) 10,400 ft. 14,000 ft. $ 4.94 oBook $ 3.21 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. Hirt Print Overhead Cost Category (Activity Cost Pool) Supervision Depreciation of machinery Assembly line preparation Cost $ 2,148 28,680 22,872 $53,700 eferences Total overhead She has also collected the following information about the cost drivers for each category (cost pool) and the amount of each driver used by the two product lines. (Round activity rate and cost per unit answers to 2 decimal places.) Usage Overhead Cost Category (Activity Cost Pool) Supervision Depreciation of nachinery As senbly 1ine preparation Driver Direct labor cost ($) Machine hours Rounded Edge $6,e00 200 hours 30 tines Squared Edge $11,900 6ee hours 94 times Total $17,900 800 hours 124 times Setups (nunber)

Answer 1

Computation of unit cost for each product using ABC:-
Computation of Activity rate using activity based costing system:-
Activity Cost Pool	Activity measures	Estimated Overhead Cost	Activity Level	Activity Rate
			Total
a	b	c	d	e = c/d
Supervision	Direct labor Cost ($)	$2,148	$           17,900	$0.12	per $ of direct labor cost
Depreciation of Machinery	Machine hours	$28,680	800	$35.85	per machine hour
Assembly Line Preparation	Setups (number)	$22,872	124	$184.45	per time
Total Manufacturing Overhead Cost		$53,700
Computation of unit product cost using activity based costing system:-
Computation of Overhead Cost :-
	Overhead Assigned	Activity Driver			Activity Rate	Total Overhead Cost
	a	b			c	d = b×c
	Rounded Edge
	Supervision	$              6,000	Direct labor Cost ($)		$0.12	$720
	Depreciation of Machinery	200	Machine hours		$35.85	$7,170
	Assembly Line Preparation	30	Setups (number)		$184.45	$5,534
					Total	$13,424
	Squared Edge
	Supervision	$            11,900	Direct labor Cost ($)		$0.12	$1,428
	Depreciation of Machinery	600	Machine hours		$35.85	$21,510
	Assembly Line Preparation	94	Setups (number)		$184.45	$17,338
					Total	$40,276
Computation of Manufacturing Cost Per unit
			Rounded Edge	Squared Edge
	Direct Material Cost		$9,400	$21,600
	Direct labor Cost		$6,000	$11,900
	Supervision		$720	$1,428
	Depreciation of Machinery		$7,170	$21,510
	Assembly Line Preparation		$5,534	$17,338
	Total Cost		$28,824	$73,776
	Quantity Produced (ft.)		10400	14000
	Per Unit Cost		$2.77	$5.27

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