# Exercise 21 2 Calculation Of Predermined Overhead Rates To Apply Abc Overhead Co

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.Total\$62,20036,000Overhead(300% of direct labor cost)36,000 71,400 108,000________\$206,200 __________10,500 ft. 14,100 ft. \$9.82Northwest’s controller wishes to apply activity-based costing (ABC) to allocate the \$108,000 of over head costs incurred by 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\$5,40056,60046,000_______\$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.Usage _______________________RoundedEdge SquaredEdge TotalSupervision.DirectLaborcost(\$) \$12,200 \$23,800 \$36,000Depreciation of machinery. Machine Hrs. 500Hrs.1500Hrs.2,000HrsAssembly line preparation..Setups(#) 40times 210times 250times________________________________________________________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.

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