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