A) Alex Inc. manufactures two products: Car Wheels and Truck Wheels. To determine the amount of...

 

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A) Alex 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: Estimated wheels produced Direct labour hours Car Wheels 40,000 1 Truck Wheels 10,000 3 Total estimated overhead costs for the two lines are $770,000. Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs are related to 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. Activity cost pools Setting up machines Assembling Inspection REQUIRED Expected use of cost drivers Estimated overhead costs 1,000 setups $220,000 70,000 labours hours $280,000 1,200 inspections $270,000 Calculate the activity base overhead rates for three cost pools. A) Alex 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: Estimated wheels produced Direct labour hours Car Wheels 40,000 1 Truck Wheels 10,000 3 Total estimated overhead costs for the two lines are $770,000. Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs are related to 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. Activity cost pools Setting up machines Assembling Inspection REQUIRED Expected use of cost drivers Estimated overhead costs 1,000 setups $220,000 70,000 labours hours $280,000 1,200 inspections $270,000 Calculate the activity base overhead rates for three cost pools.

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