Glassworks Inc. produces two types of glass shelving, rounded edge and squared e

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.
  

  
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.

  
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.)

Rounded Edge Squared Edge Total Direct materials $ 9,400 $ 21,700 $ 31,100 Direct labor 6,100 11,900 18,000 Overhead (300% of direct labor cost) 18,300 35,700 54,000 Total cost $ 33,800 $ 69,300 $ 103,100 Quantity produced 10,700 ft. 14,100 ft. Average cost per ft. (rounded) $ 3.16 $ 4.91 Required 1. Assign these three overhead cost pools to each of the two products using ABC. Activity Overhead Cost Activity Drivers Activity Rate Supervision Depreciation of machinery Assembly line preparation Direct labor cost Machine hours Setups Rounded edge ctivity rate Activity driver incurred Overhead assigned Supervision Depreciation of machinery Assembly line preparation Squared edge Activity driver incurred Overhead assigned Components Supervision Depreciation of machinery Assembly line preparation Determine average cost per foot for each of the two products using ABC Rounded edgeSquared edge

Explanation / Answer

Activity

Overhead Cost

Activity Drivers

Activity Rate

Supervision

2160

18000

Direct Labour Cost

12%

Depreciation on machinery

28840

1200

Machine hours

2403.33%

Assembly line preperation

23000

127

Setups

18110.24%

54000

Rounded Edge

Activity Rate

Activity Driver Incurred

Overhead Assigned

Supervision

12%

6100

732

Depreciation on machinery

2403.33%

400

9613

Assembly line preperation

18110.24%

32

5795

16140

Squared Edge

Activity Rate

Activity Driver Incurred

Overhead Assigned

Supervision

12%

11900

1428

Depreciation on machinery

2403.33%

800

19227

Assembly line preperation

18110.24%

95

17205

37860

Average Cost per foot using ABC

Particulars

Rounded Edge

Squared Edge

Direct Material

$ 9400

$ 21700

Direct Labour

$ 6100

$ 11900

Overhead

$ 16140

$ 37860

Total Cost

$ 31640

$ 71460

Quantity produced

10700 ft.

14100 ft.

Average Cost per foot

$ 2.96

$ 5.07

Activity

Overhead Cost

Activity Drivers

Activity Rate

Supervision

2160

18000

Direct Labour Cost

12%

Depreciation on machinery

28840

1200

Machine hours

2403.33%

Assembly line preperation

23000

127

Setups

18110.24%

54000

Rounded Edge

Activity Rate

Activity Driver Incurred

Overhead Assigned

Supervision

12%

6100

732

Depreciation on machinery

2403.33%

400

9613

Assembly line preperation

18110.24%

32

5795

16140

Squared Edge

Activity Rate

Activity Driver Incurred

Overhead Assigned

Supervision

12%

11900

1428

Depreciation on machinery

2403.33%

800

19227

Assembly line preperation

18110.24%

95

17205

37860

Average Cost per foot using ABC

Particulars

Rounded Edge

Squared Edge

Direct Material

$ 9400

$ 21700

Direct Labour

$ 6100

$ 11900

Overhead

$ 16140

$ 37860

Total Cost

$ 31640

$ 71460

Quantity produced

10700 ft.

14100 ft.

Average Cost per foot

$ 2.96

$ 5.07

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