Alonzo Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to

Question:

Alonzo Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, YuYu Ortega, has developed the following information:

Alonzo Inc. manufactures two products: car wheels and truck wheels.

Total estimated overhead costs for the two product lines are $840,000.
Instructions
(a) Calculate the overhead cost assigned to the car wheels and truck wheels, assuming that direct labour hours is used to allocate overhead costs.
(b) YuYu is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheel product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs:

Alonzo Inc. manufactures two products: car wheels and truck wheels.

Calculate the activity-based overhead rates for these three cost pools.
(c) Calculate the cost that is assigned to the car and truck product lines using an activity-based costing system, given the following information:

Alonzo Inc. manufactures two products: car wheels and truck wheels.

(d) What do you believe YuYu should do?

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