As you learned in the previous chapters, Current Designs has two main product lines-composite kayaks, which are handmade and very labor-intensive and rotomolded kayaks, which require less labor but employ more expensive equipment. Current Designs controller, Diane Buswell, is now evaluating several different 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. Diane has decided to use the following activities and costs to evaluate the methods of assigning overhead. Cost $ 128,000 160.000 169.000 36,000 Activities Designing new models Creating and testing prototypes Creating molds for kayaks Operating oven for the rotomolded 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 process; many of these costs are related to the space required in the building) Total 27,000 192.000 187,000 $ 899,000 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 assigned with the other costs. For purposes of this analysis, assume that Current Designs uses $ 256,000 in direct labor costs to produce 1,000 composite kayaks and $ 266,500 in direct labor costs to produce 4,000 rotomolded kayaks each year. X Your answer is incorrect One method of assigning overhead would assign the common costs to each product line by using an assignment 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 Dane 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 costs of operating the oven and vacuum lineave been directly assigned, determine the total amount to be assigned to the composite kayak line and the rotomolded layak line, and the amount to be wigned to each of the units in each line. Round cost signed per unit to 2 decimal ploceso 125.25) Composite Rotomolded Total cost assigned $ 454000 5 445000 Cost assigned per unit $ 454 111.25 eTextbook and Media Another method of assigning overhead is to use direct labor dollars as an assignment basis. Remembering that the costs of the oven and the vacuum line have been assigned directly to the product lines, allocate the remaining costs using direct labor dollars as the allocation basis. Then, determine the amount of overhead that should be assigned to each unit of each product line using this method. (Round cost assigned per unit to 2 decimal places, e.g. 125.25.) Composite Rotomolded Total cost assigned $ $ Cost assigned per unit S Activity based conting requires a cost dewer for each cost pool the the following information to the costs to the product lines in the activity based costing approach Oriver Amount for Composite Kayaks Oriver Amount for Motomelded Kayaks Cost Drivers Number of models 1 Active Cont Poole Designing new models Creating and testing prototypes Orating for voks Superwhine proti emelores Number of prototypes 6 3 Number of mots 11 1 Number of employees 13 11 Curing time Number of dance time 16.000 2.000 What amount of averad should be signed to each composite kayak asing this method? What amowo overhead should be wigned to each roomolded kayak uruth method/Hound.com assigned per wilt to 2 decimal places 125.35/ Composite Robomolded Total cost and S Coute per un 5
