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Toyota uses activity-based costing (ABC) to allocate overhead costs. The company has identified the following cost pools and cost drivers: Cost Pool Budgeted Overhead Cost

Toyota uses activity-based costing (ABC) to allocate overhead costs. The company has identified the following cost pools and cost drivers:

Cost Pool

Budgeted Overhead

Cost Driver

Budgeted Cost Driver Units

Machine Setup

$300,000

Setup Hours

1,500

Quality Control

$200,000

Inspection Hours

2,000

Maintenance

$400,000

Machine Hours

10,000

During the year, the following actual usage was recorded:

Product

Setup Hours

Inspection Hours

Machine Hours

Corolla

500

600

4,000

Camry

600

800

3,000

Prius

400

600

3,000

Requirements:

  1. Calculate the overhead allocation rate for each cost pool.
  2. Determine the total overhead allocated to each product.
  3. Prepare an overhead allocation summary for Toyota.
  4. Analyze the cost drivers' impact on each product.

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