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oadster Tires produces a variety of auto and truck tires at its Dayton manufacturing plant. The plant is highly automated and uses an activity-based costing
oadster Tires produces a variety of auto and truck tires at its Dayton manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below:
Activities: | Unit Level | Batch Level | Product Level | Facility Level |
Cost | $20,000 | $50,000 | $60,000 | $100,000 |
Cost Driver | 2500 labor hours | 100 set ups | % of use | 20,000 units |
Production of 500 units of a small tractor tire required 200 labor hours, 2 setups, and consumed 15% of the product sustaining activities.
Overhead allocated using direct labor would be :
Overhead allocated using activity based costing would be
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