Question 29 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, Diane Buswell, 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. Diane has decided to use the following activities and costs to evaluate the methods of assigning overhead. Activities Designing new models Creating and testing prototypes Creating moulds for kayaks Operating the oven for the rotomoulded kayaks Operating the vacuum line for the composite kayaks Supervising production employees 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) Total Cost $128,000 160,000 182,000 38,000 29,000 184,000 192,000 $913,000 As Diane 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 $300,750 in direct labour costs to produce 4,000 rotomoulded kayaks each year. (b) 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, allocate 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 $