P3. Sam Inc. manufactures two products: regular tires and snow tires. To determine the amount of overhead assigned to each product line, the controller, Robert Hermann, has developed the following information. a. Assign overhead using traditional costing. Regular Snow Estimated tires produced 60,000 10,000 Machine hours per tire 2 3 Total estimated overhead costs for the two product lines are $900,000. Instructions 1: Compute the overhead cost assigned to the regular tires and snow tires, assuming that the machine hour is used to assign overhead costs. b. Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the snow tires product line because of its complexity. He, therefore, develops the following three activity cost pools and related cost drivers to better understand these costs. Estimated Use of Cost Drivers Estimated Overhead Costs Activity Cost Pools Setting up machines 500 setups $300,000 Assembling 7,000 labor hours 350,000 Inspection 250,000 250 inspections Instruction 2: Compute the activity-based overhead rates for these three cost pools. c. Estimated Use of Cost Drivers per Product Regular Snow Number of setups 200 300 Direct labor hours. 2,500 4,500 Number of inspections 150 100 Instruction 3: Compute the overhead costs assigned to regular tire productions and snow tire production using ABC. d. The following information pertains to direct material and direct labor costs for regular tires and snow tires. Direct materials costs for regular tire productions = $450,000 Direct labor costs for regular tire productions = $350,000 Number of regular tires manufactured = 60,000 Direct materials costs for snow tire productions = $500,000 Direct labor costs for snow tire productions - $400,000 Number of snow tires manufactured = 10,000 Instruction 4: Compute the Costs of Goods manufactured for regular tires and snow tires and per-unit costs of goods manufactured for each product using ABC