Ch 17-E4-Re AutoSave ABESUE Gener Su Home Insert Draw Page Layout Formulas Data Review View X Calibel (Body) 11 AAS E P a Wrap Textv Paste BIV A A TEE Merge & Center 1 X fx A B C D E LM - E174 - Assign overhead using traditional costing and ABC Name: 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 Truck 10,000 40,000 Estimated wheels produced Direct labor hours per wheel Total estimated overhead costs for the two product lines are: 5770,000 1 Instructions 2 (a) Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. 4 (6) Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the thing 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. 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 270,000 Total $770,000 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 Expected Use of Cost Drivers per Product 200 Total 1.000 Number of setups Direct labor hours Number of inspections 40,000 Truck 800 30,000 1,100 100 ( What do you believe Hermann should do? 36 NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". 40 a) Direct labor hours for car wheels 11 A = = = a b Wrap Text- Calibri (Body) BIU A A Paste Merge & Ce ui 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 Total Overhead Direct labor hours Overhead rate / direct labor hour Total OH assigned ABC Rate 57 (b) + Activity Cost Pool Setting up machines Assembling Inspection Estimated OH Value Value Value Expected Use of Cost Drivers Value Value Value /setup /labor hour /inspection Car Wheels ABC Cost Assigned X Activity Cost Pool Setting up machines Assembling Inspection Total cost assigned Expected Use of Cost Driver/Unit Value Value Value Rates Value Value Value 7 Truck Wheels Assigned Activity Cost Pool Setting up machines Assembling Inspection Total cost assigned Expected Use of Cost Driver/Unit Value Value ABC OH Rates Value Value Value Value Ch 17-54 View AutoSave E U = Home Insert Draw Page Layout Formulas Data Thu Calibri (Body) 11 AA EE Paste BLU E QUA E Review P Uth Wrap Testy E Merge & Conter v UI D E Value Value Value B C Setting up machines Assembling Inspection Total cost assigned ? Value Value Truck Wheels Cost - Assigned Activity Cost Pool Setting up machines Assembling Inspection Total cost assigned Expected Use of Cost Driver/Unit Value Value Value ABC OH Rates Value Value Value (d) What do you believe Hermann should do? 7 After you have completed E17-4, consider the additional question 8 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. Copy this worksheet and create a new tab in this workbook named Option for this work If you use formulas in Excel to do this work, then your cales will be done when you copy the worksheet men &