As you learned in the previous chapters, Current Designs has two main product linescomposite kayaks, which are handmade and very labour-intensive, and rotomoulded kayaks, which require less labour but use more expensive equipment. Current Designs' controller, Sarah Allen, 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. Sarah has decided to use the following activities and costs to evaluate the methods of assigning overhead.

Activity	Cost
Designing new models	$112,000
Creating and testing prototypes	144,000
Creating moulds for kayaks	182,000
Operating the oven for the rotomoulded kayaks	43,000
Operating the vacuum line for the composite kayaks	26,000
Supervising production employees	184,000
Curing (the time that is needed for the chemical processes to finish before the next step in the production process; many of these costs are related to the space required in the building)	176,000
Total	$867,000

As Sarah examines the data, she decides that the cost of operating the oven for the rotomoulded 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 with the other costs. For purposes of this analysis, assume that Current Designs uses $227,000 in direct labour costs to produce 1,000 composite kayaks and $271,750 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. Sarah 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 decimal places, e.g. 125.25.)

	Composite	Rotomoulded
Total cost assigned	$ ?	$ ?
Cost assigned per unit	$ ?	$ ?

Another method of allocating overhead is to use direct labour dollars as an allocation basis. Remembering that the costs of operating the oven and the vacuum line have been assigned directly to the product lines, assign the remaining costs using direct labour dollars as the allocation basis. Then, determine the amount of overhead that should be assigned to each of the units in each line. (Round cost assigned per unit to 2 decimal places, e.g. 125.25.)

	Composite	Rotomoulded
Total cost assigned	$ ?	$ ?
Cost assigned per unit	$ ?	$ ?

Activity-based costing requires a cost driver for each cost pool. Use the following information to assign the costs to the product lines using the activity-based costing approach.

Activity	Cost Driver	Driver Amount for Composite Kayaks	Driver Amount for Rotomoulded Kayaks
Designing new models	Number of models	3	1
Creating and testing prototypes	Number of prototypes	6	2
Creating moulds for kayaks	Number of moulds	12	1
Supervising production employees	Number of employees	11	12
Curing	Number of days of curing time	14,000	2,000

What amount of overhead should be assigned to each composite kayak using this method? What amount of overhead should be assigned to each rotomoulded kayak using this method? (Round cost assigned per unit to 2 decimal places, e.g. 125.25.)

	Composite	Rotomoulded
Total cost assigned	$ ?	$ ?
Cost assigned per unit	$ ?	$ ?