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Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 35,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $657,200. Overhead rate $ 10.60 per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to assign overhead costs. Car wheels Truck wheels $ 371,000 286,200 Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels 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 Overhead Costs Estimated Use of Cost Drivers Activity Cost Pools Setting up machines $186,000 1,000 setups Assembling 248,000 62,000 labor hours Inspection 223,200 1,200 inspections Compute the activity-based overhead rates for these three cost pools. Setting up machines Assembling Inspection Overhead Rates 186 /setup 4 /DLH 186 /inspection Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 35,000 27,000 Number of inspections 100 1,100 Setting up machines $ Assembling Inspection $ Total cost assigned Car Wheels $ Truck Wheels

Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 35,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $657,200. Overhead rate $ 10.60 per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to assign overhead costs. Car wheels Truck wheels $ 371,000 286,200 Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels 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 Overhead Costs Estimated Use of Cost Drivers Activity Cost Pools Setting up machines $186,000 1,000 setups Assembling 248,000 62,000 labor hours Inspection 223,200 1,200 inspections Compute the activity-based overhead rates for these three cost pools. Setting up machines Assembling Inspection Overhead Rates 186 /setup 4 /DLH 186 /inspection Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 35,000 27,000 Number of inspections 100 1,100 Setting up machines $ Assembling Inspection $ Total cost assigned Car Wheels $ Truck Wheels

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 3CE: Lansing. Inc., provided the following data for its two producing departments: Machine hours are used...
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Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 35,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $657,200. Overhead rate $ 10.60 per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to assign overhead costs. Car wheels Truck wheels $ 371,000 286,200 Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels 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 Overhead Costs Estimated Use of Cost Drivers Activity Cost Pools Setting up machines $186,000 1,000 setups Assembling 248,000 62,000 labor hours Inspection 223,200 1,200 inspections Compute the activity-based overhead rates for these three cost pools. Setting up machines Assembling Inspection Overhead Rates 186 /setup 4 /DLH 186 /inspection Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 35,000 27,000 Number of inspections 100 1,100 Setting up machines $ Assembling Inspection $ Total cost assigned Car Wheels $ Truck Wheels
Transcribed Image Text:Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 35,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $657,200. Overhead rate $ 10.60 per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to assign overhead costs. Car wheels Truck wheels $ 371,000 286,200 Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels 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 Overhead Costs Estimated Use of Cost Drivers Activity Cost Pools Setting up machines $186,000 1,000 setups Assembling 248,000 62,000 labor hours Inspection 223,200 1,200 inspections Compute the activity-based overhead rates for these three cost pools. Setting up machines Assembling Inspection Overhead Rates 186 /setup 4 /DLH 186 /inspection Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 35,000 27,000 Number of inspections 100 1,100 Setting up machines $ Assembling Inspection $ Total cost assigned Car Wheels $ Truck Wheels
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