Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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, Kimberly Young, 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. Kimberly has decided to use the following activities and costs to evaluate the methods of assigning overhead. Activity Cost Designing new models $124,000 Creating and testing prototypes 160,000 Creating moulds for kayaks 196,000 Operating the oven for the rotomoulded kayaks 36,000 Operating the vacuum line for the composite kayaks 28,000 Supervising production employees 168,000 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) 170,000 SE Total $882,000 As Kimberly 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 $241,000 in direct labour costs to produce 1,000 composite kayaks and $270,250 in direct labour costs to produce 4,000 rotomoulded kayaks each year. 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, eg. 125.25.) Composite Rotomoulded Total cost assigned $ $ $ Cost assigned per unit ta $ $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started