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 36,000 15.000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $858,600. Calculate overhead rate. (Round answer to 2 decimal places, eg. 12.25.) Overhead rate s 858600 per direct labor hour eTextbook and Media Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels 36000 Truck wheels %24 45000

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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
36,000
15,000
Direct labor hours per wheel
3
Total estimated overhead costs for the two product lines are $858,600.
Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.)
Overhead rate s
858600
per direct labor hour
eTextbook and Media
Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate
overhead costs.
Car wheels
36000
Truck wheels
45000
eTextbook and Media
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 Use of
Estimated Overhead
Activity Cost Pools
Cost Drivers
Costs
Setting up machines
1,000 setups
$243,000
Assembling
81,000 labor hours
324,000
Inspection
1,200 inspections
291,600
Compute the activity-based overhead rates for these three cost pools.
Overhead Rates
Setting up machines
243
%24
%24
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 36,000 15,000 Direct labor hours per wheel 3 Total estimated overhead costs for the two product lines are $858,600. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate s 858600 per direct labor hour eTextbook and Media Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels 36000 Truck wheels 45000 eTextbook and Media 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 Use of Estimated Overhead Activity Cost Pools Cost Drivers Costs Setting up machines 1,000 setups $243,000 Assembling 81,000 labor hours 324,000 Inspection 1,200 inspections 291,600 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines 243 %24 %24
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.
Estimated Use of Cost Drivers per Product
Car
Truck
Number of setups
200
800
Direct labor hours
36,000
45,000
Number of inspections
100
1,100
Car Wheels
Truck Wheels
Setting up machines
24
%24
Assembling
Inspection
24
Total cost assigned
%24
%24
%24
Transcribed Image Text: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. Estimated Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 36,000 45,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines 24 %24 Assembling Inspection 24 Total cost assigned %24 %24 %24
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