Reference no: EM131538693

Question: Pane 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.

Pane'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)                                         Cost

Supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,160

Depreciation of machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28,840

Assembly line preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000

Total overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,000

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.

Use this information to

(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, and

(3) compare the average cost per foot under ABC with the average cost per foot under the current method for each product. For part 3, explain why a difference between the two cost allocation methods exists.