Exercise 17-04 a1-a2, b-c

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.

		Car		Truck
Estimated wheels produced		40,000		11,000
Direct labor hours per wheel		1		3

Total estimated overhead costs for the two product lines are $846,800.

Exercise 17-04 al-a2, b-c 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. Estimated wheels produced Direct labor hours per wheel Car 40,000 1 Truck 11,000 3 Total estimated overhead costs for the two product lines are $846,800. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate 11.60 per direct labor hour $ Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels 11.60 Truck wheels 34.80 $ Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck 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. Activity Cost Pools Setting up machines Assembling Inspection Estimated Use of Cost Drivers 1,000 setups 73,000 labor hours 1,200 inspections Estimated Overhead Costs $219,000 365,000 262,800 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Activity Cost Pools Setting up machines Assembling Inspection Estimated Use of Cost Drivers 1,000 setups 73,000 labor hours 1,200 inspections Estimated Overhead Costs $219,000 365,000 262,800 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines $ Assembling $ Inspection $ Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Car Estimated Use of Cost Drivers per Product Truck Number of setups 200 800 Direct labor hours 40,000 33,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines $ $ Assembling $ Inspection $ Total cost assigned $ $