AutoSave OB R File Home Insert U Page Layout E xcelTemplateAssignment_Ch04 (5) - Excel Search Formulas Data Review View HelpDYMO Label QuickBooks G X V 04-4 - Assign overhead using traditional costing and ABC A B C D E F 1 E4-4 - Assign overhead using traditional costing and ABC 2 Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to 3 assign to each product line, the controller, Robert Hermann, has developed the following information. Car 40.000 Estimated wheels produced Direct labor hours per wheel Truck 10,000 9 Total estimated overhead costs for the two product lines are $770,000. 10 11 Instructions 12 (a) Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours 13 is used to allocate overhead costs. 14. (b) Hermann is not satisfied with the traditional method of allocating overhead because he believes that most 15 of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops 16 the following three activity cost pools and related cost drivers to better understand these costs. Expected Use of Estimated Overhead Activity Cost Pools Cost Drivers Costs Setting up machines 1,000 setups $220,000 Assembling 70,000 labor hours 280,000 Inspection 1,200 inspections pocoons 270,000 24 Compute the activity-based overhead rates for these three cost pools 25 (c) Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based 26 costing system, given the following Information. 29 30 Expected Use of Cost Drivers per Product Car Number of setups 200 Direct labor hours 40,000 Number of Inspections 31 32 Truck 800 30,000 1.100 33 400 34 (d) What do you believe Hermann should do? 35 54-1 4-4 E4-9 PA-1A | P4-2 FM AutoSave HP File Home Excel TemplateAssignment Ch04 (5) - Excel Formulas Data Review View Help Insert Search DYMO Label Q Page Layout A1 w E4-4 - Assign overhead using traditional costing and ABC 4 E F G H I J K 36 NOTE: Enter a number in cells requesting a value; enter either a number or a formula in 40 (a) Direct labor hours for car wheels Direct labor hours for truck wheels Total Direct labor hours Value Value Total estimated overhead Total direct labor hours OH rate/DLH Value Value Overhead assigned: Car wheels Truck wheels Direct labor hours Overhead rate / direct labor hour Total OH assigned Activity Cost Pool Setting up machines Assembling Inspection Estimated OH Value Value Value Expected Use + of Cost Orivers = Value Value Value ABC OH Rate ? /setup labor hour inspection Cost Assigned Car Wheels Expected Use of Activity Cost Pool Cost Driver/Unit x Setting up machines Value Assembling Value 1 Inspection Value Total cost assigned 14-1844 649 P4-1A | P4-2A CD ABC OH Ratos Value Value Value 2 ? Type here to search len 64-4 - Assign overhead using traditional costing and ABC G Value Inspection Value inspection Car Wheels Cost Assigned Activity Cost Pool Setting up machines Assembling Inspection Total cost assigned Expected Use of Cost Driver/Unit x Value Value Value ABC Rates Value Value Value Truck Wheels ABC OH Rates Value Cost Assigned Expected Use of Cost Driver/Unit Value ! Value Value Activity Cost Pool Setting up machines Assembling Inspection Total cost assigned Value Value ) What do you belleve Hermann should do? After you have completed E4-4, consider the additional question. 1. Assume that total estimated overhead costs changed to $850,000 and the estimated overhead for Setting up machines and Assembly changed to $260,000 and $320,000 respectively. Redo Instruction (a) to (C). Round overhead rates to two decimal points. 164-1 4-4 14:9 P4-1A | P4-2A CDA E O Type here to search