CD4 - Excel Tutorial                                                 As you learned in the previous chapters, Current Designs has two main product lines - composite kayaks, which are handmade and       very labor-intensive, and rotomolded kayaks, which require less labor but employ more expensive equipment.Current Design's       controller, Diane Buswell, is now evaluating several different 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   Cost             Designing new models         $121,000             Creating and testing prototypes       152,000             Creating molds for kayaks       188,500             Operating oven for the rotomolded kayaks     40,000             Operating the vacuum line for the composite kayaks     28,000             Supervising production employees       180,000             Curing time :(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)         190,500             Total           $900,000                                            As Diane examines the data, she decides that the cost of operating the oven for the rotomolded kayaks and the cost of operating     the vacuum line for the composite kayaks can be directly assigned to each of these products lines and do not need to be allocated       with the other costs.                                                   Instructions                       For  purpose of this analysis, assume that Current Designs uses $234,000 in direct labor costs to produce 1,000 composite kayaks       and $286,000 in direct labor costs to produce 4,000 rotomolded kayaks each year.             (a)  One method of allocating overhead would allocate the common costs to each product line by using a allocation 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 thatthe cost 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.                                             (b)  Another method of allocating overhead is to use direct labor dollars as an allocation basis.  Remembering that the costs of the               oven and the vacuum line have been assigned directly to the product lines, allocate the remaining costs using direct labor               dollars as the allocation basis.  Then, determine the amount of overhead that should be assigned to each unit of each product               line using this method.                                                 (c)  Activity-based costing requires a cost driver for each cost pool.Use the following information to assign the costs to the product            lines using the activity-based costing approach.                                                             Driver Amount for Driver Amount for     Activity Cost Pools   Cost Drivers   Composite Kayaks Rotomolded Kayaks         Designing new models Number of models     3 1         Creating and test prototypes Number of prototypes     6 2         Creating molds for kayaks Number of molds     12 1         Supervising production kayaks Number of employees     12 12         Curing time   Number of days of curing time   15,000 2,000                                      What amount of overhead should be assigned to each composite kayak using this method?  What amount of overhead            should be assigned to each rotomolded kayak using this method?                                           (d)  Which of the three methods do you think Current Designs should use? Why?                                          

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