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			$	21,700		$	31,300
Direct labor			6,000				11,900			17,900
Overhead (300% of direct labor cost)			18,000				35,700			53,700
Total cost		$	33,600			$	69,300		$	102,900
Quantity produced			10,300	ft.			14,100	ft.
Average cost per ft. (rounded)		$	3.26			$	4.91

  
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		800	hours		1,000	hours
Assembly line preparation	Setups (number)		31	times		94	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			2,148	17,900	Direct labor cost		12.00%
Depreciation of machinery			28,680	1,000	machine hours		28.68
Assembly line preparation			22,872	125	Setups		182.98
Rounded Edge		Activity rate					Activity	overhead
							driver inc	Assigned
Supervision			12.00%		Direct labor cost		6,000	720
Depreciation of machinery			28.68		machine hours		200	5736
Assembly line preparation			182.98		Setups		31	5672
								12128
Squared Edge'		Activity rate					Activity	overhead
Components							driver inc	Assigned
Supervision			12.00%		Direct labor cost		11,900	1428
Depreciation of machinery			28.68		machine hours		800	22944
Assembly line preparation			182.98		Setups		94	17200
								41572
2)					Rounded	Squared
					Edge	Edge
	Direct materials				9,600	21,700
	Direct labor				6,000	11,900
	overhead				12128	41,572
	total cost				27728	75,172
	Quantity produced				10,300	14,100
	Average cost per foot				2.69	5.33