As you learned in the previous chapters, Current Designs has two main product lines-composite kayaks, which are handmade andvery 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 toensure that costs are appropriately assigned to the company's products. At the same time, the system that is used must not be socomplex 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.ActivitiesDesigning new modelsCreating and testing prototypesCreating molds for kayaksCost$124,000144,000182,000Operating oven for the rotomolded kayaks41,000Operating the vacuum line for the composite kayaks28,000Supervising production employees168,000Curing time (the time that is needed for the chemicalprocesses to finish before the next step in theproduction process; many of these costs are relatedto the space required in the building)Total204,000$891,000As Diane examines the data, she decides that the cost of operating the oven for the rotomolded kayaks and the cost of operating thevacuum line for the composite kayaks can be directly assigned to each of these product lines and do not need to be assigned with theother costs,For purposes of this analysis, assume that Current Designs uses $219,000 in direct labor costs to produce 1,000 composite kayaks and$294,750 in direct labor costs to produce 4,000 rotomolded kayaks each year.(a)One method of assigning overhead would assign the common costs to each product line by using an assignment basis such as thenumber of employees working on each type of kayak or the amount of factory space used for the production of each type of kayak.Diane knows that about 50% of the area of the plant and 50% of the employees work on the composite kayaks, and the remainingspace and other employees work on the rotomolded kayaks. Using this information and remembering that the costs of operatingthe oven and vacuum line have been directly assigned, determine the total amount to be assigned to the composite kayak line andthe rotomolded kayak line, and the amount to be assigned to each of the units in each line. (Round cost assigned per unit to 2 decimalplaces, e.g. 125.25.)CompositeTotal cost assigned$$Cost assigned per unit$$Rotomolded

Cost accounting system:The cost accounting system refers to the method that will be used by the…

(a) 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. Diane 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 line have been directly assigned, determine the total amount to be assigned to the composite kayak line and the rotomolded kayak line, and the amount to be assigned to each of the units in each line. (Round cost assigned per unit to 2 decimal places, eg. 125.25.) Composite Rotomolded Total cost assigned $ $ Cost assigned per unit $ $

(a) 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. Diane 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 line have been directly assigned, determine the total amount to be assigned to the composite kayak line and the rotomolded kayak line, and the amount to be assigned to each of the units in each line. (Round cost assigned per unit to 2 decimal places, eg. 125.25.) Composite Rotomolded Total cost assigned $ $ Cost assigned per unit $ $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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