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As you learned in the previous chapters, Current Designs has two main product lines-composite kayaks, which are handmade and very labour-intensive, and rotomoulded kayaks, which

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As you learned in the previous chapters, Current Designs has two main product lines-composite kayaks, which are handmade and very labour-intensive, and rotomoulded kayaks, which require less labour but use more expensive equipment. Current Designs' controller, Betty Harris, is now evaluating several methods of assigning overhead to these products. It is important to ensure that costs are appropriately assigned to the company's products. At the same time, the system that is used must not be so complex that its costs are greater than its benefits. Betty has decided to use the following activities and costs to evaluate the methods of assigning overhead. As Betty examines the data, she decides that the cost of operating the oven for the rotomoulded kayaks and the cost of operating the yacuum line for the composite kayaks can be directly assigned to each of these product lines and do not need to be allocated with the other costs. For purposes of this analysis, assume that Current Designs uses $256,000 in direct labour costs to produce 1,000 composite kayalis and $266,500 in direct labour costs to produce 4,000 rotomoulded kayaks each year: One method of allocating overhead would assign the common costs to each product line by using an allocation basis such as 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. Betty knows that about 50% of the area of the plant and 50% of the employees relate to the composite kayaks, and the remaining space and other employees are used for the rotomoulded kayaks. Using this information, and remembering that the costs of operating the oven and the vacuum lines have been directly assigned, determine the total amount to be assigned to the composite kayak line and the rotomoulded kayak line, and the amount to be assigned to of the units in each line. (Round cost assigned per unit to 2 decimol places, eg. 125.25.)

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