Question

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Exercise 17-14 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 (300% of direct labor cost) Total cost Quantity produced Average cost per ft. (rounded) Rounded Edge $ 9,500 6,000 18,000 $ 33,500 10,600 ft. $ 3.16 Squared Edge Total $ 21,500 $ 31,000 12,000 18,000 36,000 54,000 $ 69,500 $ 103,000 14,100 ft. $ 4.93 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 ($) Machine hours Setups (number) Rounded Edge $6,000 400 hours 31 times Squared Edge $12,000 600 hours 95 times Total $18,000 1,000 hours 126 times

Answer 1

Activity	Overhead Cost	Activity Driver	Activity Rate = Overhead/Activity Driver
Supervision	2160	18000	12%	of Direct Labor cost
Depreciation	28840	1000	28.84	per machine hour
Assembly line preparation	23000	126	182.54	per setup
Rounded Edge	Activity Rate	Driver Incurred	Overhead Assigned = Rate*Driver
Supervision	12%	6000	720
Depreciation	28.84	400	11536
Assembly line preparation	182.54	31	5658.730159
		Total	17914.73016
Squared Edge	Activity Rate	Driver Incurred	Overhead Assigned = Rate*Driver
Supervision	12%	12000	1440
Depreciation	28.84	600	17304
Assembly line preparation	182.5396825	95	17341.26984
			36085.26984
	Rounded Edge	Squared Edge
Direct Material	9500	21500
Direct Labor	6000	12000
Overheads	17914.73016	36085.26984
Total Cost	33414.73016	69585.26984
Quantity Produced	10600	14100
Average cost per foot	3.152333034	4.935125521