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Oriole Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert
Oriole 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 43,000 1 Truck 11,000 3 Total estimated overhead costs for the two product lines are $881,600, Calculate overhead rate. (Round answer to 2 decimal places, eg. 12.25.) Overhead rate $ 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 $ Truck wheels $ 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 76,000 labor hours 1,200 inspections Estimated Overhead Costs $228,000 380,000 273,600 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 43,000 33,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines $ $ Assembling $ $ Inspection $ $ Total cost assigned $ $
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