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Exercise C-6 Activity-based costing P2
Northwest Company 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.
Rounded edge squared edge
Total
Direct materials............................... $19,000 $43,200 $ 62,200
Direct labor................................... 12,200 23,800 36,000
Total cost.....................................
$67.800 $138,400 $206,200
Ouantity produced............................. 10,500 ft. 11,100 ft.
Average tost per ft (rounded).................... $ 6.46 $ 9.82
Northwest's controller wishes to apply activity-based costing (ABC) to allocate the $108,000 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 (actually cost pool)costs
Supervision ................................................
$ 5,400
56,500
Assembly line preparation.....................................
46,000
Total overhead..............................................
$108,000
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.
Overhead cost category Driver Usege (actually cost pool) Rounded edge squared edge Total Supervision ........................ Direct labor cost ($$12,200 $23,800 36,000 Depreciation of machinery .....Machine hours 500 hours 1,500hours 2,000hours Assembly line preparation......Setups (number) 40 times 210 times 250 times
Required
1. Assign these three overhead cost pools to each of the two products using ABC.
2. Determine average cost per foot for each of the two products using ABC. Check (2: Rounded edge. 15.19: Squared edge. $10.76
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Chapter C Solutions
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