Question

10 current Design has two main product lines.compoule yale, which are handmade and 11 very laborIntensive and retomolded kayaks, which require less laber but employ more expensive equipment Current Design's 12 controller, Dlane unwell, is now evaluating several different methods of wigning overhead to these products. It is important to 13 ensure that costs are appropriately assigned to the company's products. At the same time, the water that is used must not be 14 complex that its costs are greater than its benefits. 16 Diane has decided to use the following activities and costs to evaluate the methods of signing overhead, SIR218.75 237,800.00 Activities Designing new models Creating and testing prototypes Creating molds for kayaks Operating oven for the rotomoded kayaks Operating the vacuum line for the composite kayaks Supervising production employees Curing time the time that is needed for the chemical processes to finish before the next step in the production proces, many of these costs are related to the space required in the building Total 562.500.00 $43,750.00 $281.250.00 $292,500.00 $1,406,250.00 P As Diane examines the data, she decides that the cost of operating the oven for the rotomolded kayaks and the cost of operating the vacuum line for the composite kayaks can be directly assigned to each of these product lines and do not need to be allocated th the other costs 4 15 Instructions For purpose of this analysis, assume that Current Designs uses $292,500 in direct labor costs to produce 2,000 composite kayaks and 5357,500 in direct labor costs to produce 8.000 rotomolded kayaks each year. (a) One method of allocating overhead would allocate the common costs to each product line by using a allocation basis such as by using a allocation basiswch a the number of employees working on each type of kayak or the amount of factory space used for the production of each type of kayak Diane knows that about 50% of the area of the plant and 50% of the employees work on the composite kayaks, and the remaining space and other employees work on the rotomolded kayaks. Using this information and remembering that the cost of operating the oven and vacuum line have been directly assigned, determine the total amount to be assigned to the composite kayak line and the rotomolded kayak line, and the amount to be assigned to each of the units in eachine

is this better? i posted this question two times and everyone is saying its not clear. i cant make it more clear then this. its due soon can someone please do it. its been two days since i post it

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Answer 1

Allocation allec basis of cost on basis of direct Total Overheads = $1,406, 250 .. Composite Kayak s 50%. $1,406,250 $ 703125 | Roto molded Kayak s 5 50%. * $1,406,250 $ 703,125 . Pastic wan Composite Kayal Rotomolded Kaya Died Labour 292.50 500 357,500 overheads 703, 125 763, 125 Total . 996,625 1,060,625 (6) Allocation of cost on basis of disur bass labour con overheads a $1,406,250 Total Doi Karat Com s sot. * $ 1,406,250 x 200 s. $7ess 281250 lew Rotomolded Karl s 5o 1,406, 200x 1125, owo soos 1000

Particular Composite Kayak Rotomolded Kayak Direct Labour 29250 0 357,500 Overheads 281250 11 25 oco Total 573750 1482 500

Allocation costing. of cost on basis of activity Based Activity Pool cost lost Driver Calculation overheads assigned Composite kay Rotomolded Designing new No. of models 1618 *189218-75 141913-5 2)218 * 189218-75 41304-68 models Creating & test prototypes No. of prototypes (1) / 16x 237,500 178125 2/16x237, soo 59375 Creating molds for kayaks No. of molds 10 24/26X294531-25 211875 5 26 x 29453125 22656.25 I No. of employees 1/87 387500 2) 24/487381500 193750 Supervising production kayaks. 193750 Curing time 18150 x281250248161-76 21250 2P221250 No. of days of wering time 33088023 500 X281250 Total | 1033825:26 35677416 Partiwlars Composite Rotomolded 356174.16 357, soo lost allocated 2 Direct assigned 3 Total cost 4) No. of units s) lost per unit 1033825-26 292500 1326325-26 2000 713674-16 8000 663.16 89.20 Page No.

d> Use of activity based costing approach should be used as every cost is apportioned as per there respective cost daiver,