Schwynn Inc. manufactures street bicycle tires and mountain bicycle tires. The company uses activity-based costing. Schwynn has identified three overhead activity cost pools and their related cost drivers: (1) Machine set ups, driven by the number of setups; (2) Assembling, driven by direct labor hours; and (3) Inspection, driven by the number of inspections. Data relating to the company's three activity cost pools are given below for the current year:       Estimated Estimated Cost Drivers Activity Cost Overhead Street Mountain Pools Costs Tires Tires Machine set ups $  90,000 150 350 Assembling $500,000 25,000 15,000 Inspection $400,000 180 320 Questions Using the traditional approach, determine the applied overhead rate for Schwynn Inc based on direct labor hours.        2.Using the activity-based costing approach, determine the applied overhead rates for Darter Company.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Schwynn Inc. manufactures street bicycle tires and mountain bicycle tires. The company uses activity-based costing. Schwynn has identified three overhead activity cost pools and their related cost drivers: (1) Machine set ups, driven by the number of setups; (2) Assembling, driven by direct labor hours; and (3) Inspection, driven by the number of inspections. Data relating to the company's three activity cost pools are given below for the current year:

 

 

 

Estimated

Estimated Cost Drivers

Activity Cost

Overhead

Street

Mountain

Pools

Costs

Tires

Tires

Machine set ups

$  90,000

150

350

Assembling

$500,000

25,000

15,000

Inspection

$400,000

180

320

Questions

  1. Using the traditional approach, determine the applied overhead rate for Schwynn Inc based on direct labor hours.

       2.Using the activity-based costing approach, determine the applied overhead rates for Darter Company.

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