Rockaway Company Produces Two Types of Product, Flat and Round

question 27

Essay

Rockaway Company produces two types of product, flat and round, on the same production line. For the current period, the company reports the following data.
$\begin{array}{|l|l|l|l|}\hline & \text { Flat } & \text { Round } & \text { Total } \\\hline \text { Direct materials } & \$ 12,000 & \$ 24,000 & \$ 36,000 \\\hline \text { Direct labor } & 6,000 & 18,000 & 24,000 \\\hline \text { Overhead }(250 \% \text { of direct labor cost) } & \underline{15,000} & \underline{45,000} & \underline{60,000} \\\hline \text { Total cost } & \underline{\$ 33,000} & \underline{\$ 87,000} & \underline{\$ 120,000} \\\hline \text { Units produced } & 10,000 & 15,000 & \\\hline \text { Average cost per unit } & \$ 3.30 & \$ 5.80 & \\\hline\end{array}$
Rockaway's controller wishes to apply activity-based costing (ABC) to allocate the $60,000 of
overhead costs incurred by the two product lines to see whether cost per unit would change markedly from that reported above. She has collected the following information.
$\begin{array}{|l|l|l}\hline\text { Overhead Cost Category (Activity Cost Pool) }&\text { Cost }\\\hline \text { Supervision } & \$ 12,600 \\\hline \text { Depreciation of machinery } & 30,600 \\\hline \text { Assembly line preparation } & 16,800 \\\hline \text { Total overhead } & \$ 60,000\\\hline\end{array}$

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.
Assign these three overhead cost pools to flat using ABC and determine average cost per unit for the product. (Round your answer to 2 decimal places.

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Definitions:

Warm Current

A movement of ocean water that carries heat from the tropics toward the poles, influencing regional climates and marine life patterns.

North Equatorial Current

The North Equatorial Current is a significant westward-flowing ocean current found in the Atlantic, Indian, and Pacific Oceans, positioned approximately at the latitude of the northern equator.

Cold Currents

Ocean currents that originate in polar regions and move towards the equator, affecting the climate and marine life of the areas they flow through.

Warm Front

The sloping boundary between an advancing warm air mass and a cooler air mass.