Eason Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018:

Eason produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows:

The company expects to produce 500 units of each model during the year.
Requirements
1. Compute the total estimated indirect manufacturing cost for 2018.
2. Prior to 2018, Eason used a single plant-wide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent.
3. Compute the estimated ABC indirect manufacturing cost per unit of each model for 2018. Carry each cost to the nearest cent?

Transcribed Image Text:

Predetermined Overhead Allocation Rate Activity Allocation Base Materials handling Machine setup $ 4.00 per part 400.00 per setup Number of parts Number of setups Insertion of parts Finishing Number of parts Number of finishing hours 26.00 per part 90.00 per hour Standard Deluxe Parts per rim 4.0 7.0 Setups per 500 rims 18.0 18.0 Finishing hours per rim 1.0 5.5 Total direct hours per rim 5.0 6.0