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Cullumber Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert
Cullumber Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Williams, has developed the following information: Car Truck Estimated wheels produced 45,000 18,000 Direct labour hours per wheel 4 8 Total estimated overhead costsfor the two product lines are $1,620t000. Calculate the overhead cost assigned to the car wheels and truck wheels, assuming that direct labour hours are used to allocate overhead costs. Carwheels $ Truck wheels $ Total overhead $ Robert is not satised 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: Setting up machines $530,000 1,000 setups Assembling 370,000 37,000 labour hou rs Inspection 720,000 1,440 inspections Calculate the activity-based overhead rates for these three cost pools. Setting up machines $ l per setup Assembling $ l per labour hour Inspection $ l perinspection Calculate the cost that is assigned to the car and truck product lines using an activitybased costing system, given the following information: Use of Cost Drivers per Product Car Truck Number of set-ups 190 810 Direct labour hours 21,400 15,600 Number of inspections 60 1,380 Car Truck Overhead assigned $ $
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