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, Linda Williams, is now evaluating several methods of assigning overhead to these products. It is important to ensure that costs are appropriately assigned to the companys products. At the same time, the system that is used must not be so complex that its costs are greater than its benefits. Linda has decided to use the following activities and costs to evaluate the methods of assigning overhead.

Activity		Cost
Designing new models		$116,000
Creating and testing prototypes		152,000
Creating moulds for kayaks		180,000
Operating the oven for the rotomoulded kayaks		44,000
Operating the vacuum line for the composite kayaks		26,000
Supervising production employees		200,000
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)		180,000
Total		$898,000

As Linda 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 $228,000 in direct labour costs to produce 1,000 composite kayaks and $324,000 in direct labour costs to produce 4,000 rotomoulded kayaks each year.

a)

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		$enter a dollar amount		$enter a dollar amount
Cost assigned per unit		$enter a dollar amount ronded to 2 decimal places		$enter a dollar amount ronded to 2 decimal places

b)

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		11		1
Supervising production employees		Number of employees		13		12
Curing		Number of days of curing time		13,000		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		$enter a dollar amount		$enter a dollar amount
Cost assigned per unit		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places