Question

Exercise 4-14 Activity-based costing LO P3 A2 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 Direct labor Overhead (3001 of direct labor cost) Total cost Quantity produced Average cost per ft. (rounded) Rounded Edge $9.500 6. 100 18,300 $34,000 10,300 ft. $ 3.30 Squared Edge Total $21.600 31,200 11,900 18,000 35,700 54,000 $69,200 $103,200 14,200 ft. $ 4.87 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) Supervision Depreciation of machinery Assembly line preparation Total overhead Cost $ 2.160 28,840 23,000 $ 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) Supervision Depreciation of machinery Assembly line preparation Driver Direct labor cost (5) Machine hours Setups (number) Rounded Edge $6,100 400 hours 31 times Squared Edge $11,900 600 hours 93 times Total $18,000 1,000 hours 124 times

Answer 1

1. Assign these three overhead cost pools to each of the two products using ABC.

Activity	Overhead cost	Activity drivers		Activity rate
Supervision	$2,160	$18,000	Direct Labour cost	12.00%	of direct Labour costs
Depreciation of machinery	$28,840	1,000	Machine hours	$28.84	Per machine hour
Assembly line preparation	$23,000	124	Setups	$185.48	Per setup

Rounded edge	Activity rate		Actual driver included	Overhead assigned
Supervision	12.00%	of direct Labour cost	$6,100	$732
Depreciation of machinery	$28.84	per machine hour	400	$11,536
Assembly line preparation	$185.48	per setup	31	$5,750
Total overhead cost				$18,018

Squared edge	Activity rate		Actual driver included	Overhead assigned
Supervision	12%	of direct Labour cost	$11,900	$1,428
Depreciation of machinery	$28.84	per machine hour	600	$17,304
Assembly line preparation	$185.48	per setup	93	$17,250
Total overhead cost				$35,982

2. Determine average cost per foot for each of the two products using ABC

	Rounded edge	Squared edge
Total direct material cost	$9,600	$21,600
Total direct Labour cost	6,100	11,900
Total overhead cost(ABC)	18,018	35,982
Total manufacturing cost	$33,718	$69,482
Total production (feet)	10,300	14,200
Average cost per foot	$3.27	$4.89

____×____

All the best