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. Direct materials Direct labor Overhead (382% of direct labor cost) Total cost Quantity produced Average cost per ft. (rounded) Rounded Edge $ 9,500 6.100 18,388 $ 33,982 10,688 ft. $ 3.20 Squared Edge Total $ 21,500 $ 31,000 11,900 18,00 35.700 54,00 $ 69,182 $183,888 14,288 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 23,280 $ 54,800 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 ($) Machine hours Setups (number) Rounded Edge $6,100 208 hours 31 times Squared Edge $11.988 700 hours 95 times Total $18.688 900 hours 126 times Activity Rate Required: 1. Assign these three overhead cost pools to each of the two products using ABC. Activity Overhead Cost Activity Drivers Supervision Direct labor cost Depreciation of machinery Machine hours Assembly line preparation Setups Rounded edge Activity rate Activity driver Overhead assigned incurred Supervision Depreciation of machinery Assembly line preparation Squared edge Activity rate Activity driver incurred Overhead assigned Components Supervision Depreciation of machinery Assembly line preparation 2. Determine average cost per foot for each of the two products using ABC. Rounded edge Squared edge

Answer 1

A B F 1 Activity Overhead Costs ($) Activity (A) drivers (B) direct labor 2,160 18,000 cost Activity rate (A/B) direct labor 12% cost per machine 32.04 hour 28.840 900 machine hours 2 Supervision Depreciation of 3 machinery Assembly line 4 preparation 5 6 Rounded Edged 23,000 126 setups 182.54 per setup Activity rate (A) 12% Overhead Activity driver assigned ($) incurred (B) (A*B) 6,100 732 32.04 200 6,409 8 Components 9 Supervision Depreciation of 10 machinery Assembly line 11 preparation 12 Total overhead cost 13 182.54 31] 5,658.73 12,799.62

14 Squared Edged 15 Activity rate (A) Overhead Activity driver assigned (S) incurred (B) (A*B) 11,900 1,428 12% 32.04 700| 22,431 16 Components 17 Supervision Depreciation of 18 machinery Assembly line 19 preparation 20 Total overhead cost 21 Average cost per 22 foot- 182.54 951 17.341.27 41,200.381 Rounded edged ($) Squared edged ($) 9,500 21,500 6.100 11.900 12.799.62 41.200.38 Total direct material 25 cost Total direct labor 26 cost Total overhead 27 cost(ABC) Total manufacturing 28 cost Total 29 production(feet) Average cost per 30 foot 28.399.62 74,600.38 10,600 14.200 2.68 5.25

A Overhead Costs Activity drivers ($) (A) (B) Activity rate (A/B) 1 Activity 2160 18000 direct labor cost =B2/C2 direct labor cost per machine hour 28840 900 machine hours =B3/C3 2 Supervision Depreciation of 3 machinery Assembly line 4 preparation 5 6 Rounded Edged 23000 126 setups =B4/C4 per setup 7 Activity driver Activity rate (A) incurred (B) =E2 6100 Overhead assigned ($) (A*B) =B9*C9 =E3 200 =B10*c10 8 Components 9 Supervision Depreciation of 10 machinery Assembly line 11 preparation 12 Total overhead cost 13 =E4 131 =B11*011 =SUM(D9:011)

14 Squared Edged 15 Activity driver Activity rate (A) incurred (B) 11900 Overhead assigned ($) (A*B) =B17*017 =B9 =B10 700 =B18*C18 16 Components 17 Supervision Depreciation of 18 machinery Assembly line 19 preparation 20 Total overhead cost 21 =B11 =B19*C19 =SUM(D17:D19) 22 Average cost per foot- Squared edged Rounded edged ($) (8) Total direct material 25 cost 9500 21500 26 Total direct labor cost 6100 11900 Total overhead 27 cost(ABC) =D12 =D20 Total manufacturing 28 cost I=SUM(B25:B27) I=SUM(C25 C27) 29 Total production (feet) 10600 14200 30 Average cost per foot =B28/B29 =C28/C29 32