Exercise 17-17 Activity-based costing

Glassworks Inc. produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current period, the company reports the following data. Direct materials Direct labor Overhead (300% of direct labor cost) Total cost Quantity produced Average cost per ft. (rounded) Rounded Edge $ 9,700 6,00 18,000 $33,700 10,500 ft. $ 3.21 Squared Edge Total $ 21,700 $ 31,400 12,000 18,000 36,000 54.000 5 69, 700 $ 103,400 14,200 ft. $ 4.94 Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $54.000 of overhead costs incurred by the two product lines to see whether cost per foot would change markedly from that reported above. She has collected the following information Overhead Cost Category (Activity Cost Pool) Supervision Depreciation of machinery Assembly line preparation Total overhead Cost $ 2,160 28,840 23,000 554,000 She has also collected the following information about the cost drivers for each category (cost pool and the amount of each driver used by the two product lines (Round activity rate and cost per unit answers to 2 decimal places.) Usage Overhead Cost Category (Activity Cost Pool) Supervision Depreciation of machinery Assembly line preparation Driver Direct labor cost (5) Machine hours Setups (number) Rounded Edge $6,000 300 hours 30 times Squared Edge $12,000 700 hours 94 times Total $18,000 1,000 hours 124 times Activity Rato % Required: 1. Assign these three overhead cost pools to each of the two products using ABC. Activity Overhead Cost Activity Drivers Supervision Direct labor cost Depreciation of machinery Machine hours Assembly line preparation Setups Rounded edge Activity rate Supervision Depreciation of machinery Assembly line preparation Activity driver incurred Overhead assigned Squared edge Activity rato Activity driver Overhead assigned Activity rate Activity driver incurred Overhead assigned Squared edge Components Supervision Depreciation of machinery Assembly line preparation % 2. Determine average cost per foot for each of the two products using ABC. Rounded edge Squared edge