Question

Pane Company 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 (300% of direct labor cost) Rounded Edge $ 9,600 6,100 18,300 Squared Edge $ 21,800 11,900 35,700 Total $ 31,400 18,000 54,000 Total cost $ 34,000 $ 69,400 $ 103,400 Quantity produced Average cost per ft. 10,400 ft. 3.27 14,100 ft. 4.92 $ $ Pane'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 2,160 28,840 23,000 Total overhead $ 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.

Answer 1

Ans. A. Assigned the 3 cost as per ABC as under:

		CALCULATION OF TOTAL COST (USING ABC METHOD)
				ROUND AGE	SQUARED AG	TOTAL
A.	DIRECT MATERIAL			9600	21800	31400
B.	DIRECT LABOUR			6100	11900	18000
C.	OVERHEAD
	SUPERVISION			732	1428	2160
	DEPRECIATION (MACHINE HRS)			9613.33	19226.67	28840
	ASSEMBLY LINE PREP.			5704.00	17296.00	23000
	ASSIGNED COST			(16049.33)	(37950.67)	54000
		TOTAL COST		31749.33	71650.67	103400
		PRODUCION IN SQ FT		10400	14100
	B.	PER FIT COST		3.052820192	5.081607801
	NOTE: 1.SUPERVISION COST WILL BE SHARED IN THE RATION OF DIRECT LABOUR
	ie. 61:119
	2.DEPRECIATION IS TO SHARED BASED ON MACHINE HOURS USED. 4:8 OR 1:2
	3.ASSEMBLY LINE PREPERATION EXP TO BE SHARED AS PER SET UP NUMBER
	31:94

ANS. b. Average Cost will be as above 3.0528 & 5.0816 respectivly as calculated above.