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Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below. Activities: Cost Cost Driver Unit Level $91,800 5,100 labor hours Batch Level $75,600 210 setups Product Level $26,200 % of use Facility Level $102,200 51,100 units Production of 1,000 units of a small tractor tire required 300 labor hours and three setups and consumed 10% of the product sustaining activities a Overhead allocated using company-wide allocation base b Overhead allocated under activity based costing c-1. Selling price per unit under direct labor hours approach c2 Selling price per unit under activity-based costing Required: a. Instead of using ABC, suppose the company had used labor hours as a company-wide allocation base. How much total overhead would have been allocated to the tractor tire? b. How much total overhead cost will be allocated to the tire under activity-based costing? c. What price will be quoted if the product is priced at 30% above cost? Compute the price per unit under both the direct labor hours approach and under activity-based costing. The direct manufacturing costs consist of direct material of $24 and direct labor of $34 Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.

Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below. Activities: Cost Cost Driver Unit Level $91,800 5,100 labor hours Batch Level $75,600 210 setups Product Level $26,200 % of use Facility Level $102,200 51,100 units Production of 1,000 units of a small tractor tire required 300 labor hours and three setups and consumed 10% of the product sustaining activities a Overhead allocated using company-wide allocation base b Overhead allocated under activity based costing c-1. Selling price per unit under direct labor hours approach c2 Selling price per unit under activity-based costing Required: a. Instead of using ABC, suppose the company had used labor hours as a company-wide allocation base. How much total overhead would have been allocated to the tractor tire? b. How much total overhead cost will be allocated to the tire under activity-based costing? c. What price will be quoted if the product is priced at 30% above cost? Compute the price per unit under both the direct labor hours approach and under activity-based costing. The direct manufacturing costs consist of direct material of $24 and direct labor of $34 Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below. Activities: Cost Cost Driver Unit Level $91,800 5,100 labor hours Batch Level $75,600 210 setups Product Level $26,200 % of use a Overhead allocated using company-wide allocation base b Overhead allocated under activity based costing c-1 Selling price per unit under direct labor hours approach c2 Selling price per unit under activity-based costing Facility Level $102,200 51,100 units Production of 1,000 units of a small tractor tire required 300 labor hours and three setups and consumed 10% of the product sustaining activities Required: a. Instead of using ABC, suppose the company had used labor hours as a company-wide allocation base. How much total overhead would have been allocated to the tractor tire? b. How much total overhead cost will be allocated to the tire under activity based costing? c. What price will be quoted if the product is priced at 30% above cost? Compute the price per unit under both the direct labor hours approach and under activity-based costing. The direct manufacturing costs consist of direct material of $24 and direct labor of $34 Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.
Transcribed Image Text:Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below. Activities: Cost Cost Driver Unit Level $91,800 5,100 labor hours Batch Level $75,600 210 setups Product Level $26,200 % of use a Overhead allocated using company-wide allocation base b Overhead allocated under activity based costing c-1 Selling price per unit under direct labor hours approach c2 Selling price per unit under activity-based costing Facility Level $102,200 51,100 units Production of 1,000 units of a small tractor tire required 300 labor hours and three setups and consumed 10% of the product sustaining activities Required: a. Instead of using ABC, suppose the company had used labor hours as a company-wide allocation base. How much total overhead would have been allocated to the tractor tire? b. How much total overhead cost will be allocated to the tire under activity based costing? c. What price will be quoted if the product is priced at 30% above cost? Compute the price per unit under both the direct labor hours approach and under activity-based costing. The direct manufacturing costs consist of direct material of $24 and direct labor of $34 Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.
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