Question

Exercise 17-17 Activity-based costing LO P3 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 (300$ of direct labor cost) Total cost Quantity produced Average cost per ft. (rounded) Rounded Edge $ 9,300 6,000 18,000 $33,300 10,700 ft. $ 3.11 Squared Edge Total $21,400 $ 30,700 12,000 18,000 36,000 54,000 $69,400 $102,700 14,200 ft. $ 4.89 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. Cost Overhead Cost Category (Activity Cost Pool) Supervision Depreciation of machinery Assembly line preparation Total overhead $ 2,160 28,840 23,000 $ 54,000 driver She has also collected the following information about the cost drivers for each category (cost pool) and the amount 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 $6,000 200 hours 30 times Squared Edge $ 12,000 800 hours 95 times Total $18,000 1,000 hours 125 times 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 Activity Rate % Rounded edge Activity rate Activity driver incurred Overhead assigned % O Supervision Depreciation of machinery 10

Answer 1

Requirement (1) Activity Overhead Cost Supervision $ 2,160 $ Depreciation of Machinery $ 28,840 Assembly line preparation $ 23,000 Activity Drivers 18,000 Direct labour cost 1000 Machine hours 125 Setups Activity Rate 12% 28.84 Per Machine Hour 184.00 Per Setup $ $ Rounded Edge Supervision Depreciation of Machinery $ Assembly line preparation $ Activity Rate 12% 28.84 Per Machine Hour 184.00 Per Setup Activity Driver Incurred Overhead Assigned 6000 $ 720.00 200 $ 5,768.00 30 $ 5,520.00 $ 12,008.00 Squared Edge Supervision Depreciation of Machinery $ Assembly line preparation $ Activity Rate Activity Driver Incurred Overhead Assigned 12% 12000 $ 1,440.00 28.84 Per Machine Hour 800 $ 23,072.00 184.00 Per Setup 95 $ 17,480.00 $ 41,992.00 Requirement (2) Direct Material Direct Labour Overhead Total Cost Quantity Produced Average Cost per ft. Rounded Edge Squared Edge $ 9,300 $ 21,400 $ 6,000 $ 12,000 $ 12,008 $ 41,992 $ 27,308 $ 75,392 10700 14200 $ 2.55 $ 5.31 Note : Please comment down for any further clarifications