Question

Exercise 4-4 a1-a2, b-c (Video) Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 44,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $823,600.

Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate $ per direct labor hour

Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels $ Truck wheels $

Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs. Activity Cost Pools Estimated Use of Cost Drivers Estimated Overhead Costs Setting up machines 1,000 setups $213,000 Assembling 71,000 labor hours 355,000 Inspection 1,200 inspections 255,600 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines $ Assembling $ Inspection $

Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Estimated Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 44,000 27,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines $ $ Assembling $ $ Inspection $ $ Total cost assigned $ $ Click if you would like to Show Work for this question: Open Show Work

Answer 1