E5.20 (LO 1, 2) Excel Alonzo Inc. manufactures two products: car wheels and truck wheels. To deter- mine the amount of overhead to assign to each product line, the controller, YuYu Ortega, has developed the following information: Estimated wheels produced Direct labour hours per wheel Car Truck 40,000 2 10,000 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 are 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 under- stand these costs: Activity Cost Pools Setting up machines Assembling Inspection Estimated Overhead Costs $260,000 280,000 300,000 Estimated Use of Cost Drivers Calculate the activity-based overhead rates for these three cost pools. 500 set-ups 35,000 labour hours 600 inspections c. Calculate the cost that is assigned to the car and truck product lines using an activity-based costing system, given the following information: Number of set-ups Direct labour hours Number of inspections d. What do you believe Yu Yu should do? Use of Cost Drivers per Product Car Truck 100 400 20,000 15,000 50 550