Question 4: 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. Car Truck Estimated Wheel Products 40,000 10,000 Direct Labour Hours per Wheel 1.2 3.6 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. Activity cost pools Expected use of cost drivers Estimated overhead costs Setting up machines 1,000 setups $251,000 Assembling 75,000 labor hours $310,000 Inspection 1,300 inspections $289,000 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] Expected Use of Cost Drivers Per Product Car Truck Number of setups 200 800 Direct labor hours 40,000 30,000 Number of inspections 100 1,000 d. What do you believe the controller should do? [0.5 marks]