TB Problem 5-163 (Algo) Roadmaster Tires produces a variety... 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 588,400 5,200 labor hours Batch Level $66,000 220 setups Product Level $30,000 of use Production of 1,000 units of a small tractor tire required 320 labor hours and two setups and consumed 20% of the product sustaining activities. a Overhead allocated using company-wide allocation base b. Overhead allocated under activity-based coating Facility Level $153,600 51,200 units 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? 20.800 c. What price will be quoted if the product is priced at 25% 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 $22 and direct labor of $32. Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.
TB Problem 5-163 (Algo) Roadmaster Tires produces a variety... 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 588,400 5,200 labor hours Batch Level $66,000 220 setups Product Level $30,000 of use Production of 1,000 units of a small tractor tire required 320 labor hours and two setups and consumed 20% of the product sustaining activities. a Overhead allocated using company-wide allocation base b. Overhead allocated under activity-based coating Facility Level $153,600 51,200 units 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? 20.800 c. What price will be quoted if the product is priced at 25% 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 $22 and direct labor of $32. Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:TB Problem 5-163 (Algo) Roadmaster Tires produces a variety...
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
$88,400
5,200 labor hours
Batch Level
$66,000
220 setups
Production of 1,000 units of a small tractor tire required 320 labor hours and two setups and consumed 20% of the product sustaining
activities.
a. Overhead allocated using company-wide allocation base
b. Overhead allocated under activity-based costing
e-1. Selling price per unit under direct labor hours approach
0-2. Selling price per unit under activity-based costing
Product Level
$30,000
% of use
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?
$
$
Facility Level
$153,600
51,200 units
c. What price will be quoted if the product is priced at 25% 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 $22 and direct labor of $32.
Note: Do not round your intermediate calculations. Round your answers to 2 decimal places.
20,000
15,040
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