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Question 2: Raaste Ka Raja (RKR) Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each
Question 2: Raaste Ka Raja (RKR) Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller has developed the following information. Total estimated overhead costs for the two product lines are $840,000. a. Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. [2 Marks] b. The controller is not satisfied with the traditional method of allocating overhead. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs. Compute the activity-based overhead rates for these three cost pools. [1.5 marks] c. Calculate the overhead cost assigned to the car wheels and truck wheels product lines using an activity-based costing system on the basis of the following information - [2 marks] d. What do you believe the controller should do? [0.5 marks]
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