Altex 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. Car Truck Estimated wheels produced 36,000 15,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $858,600. Your answer is incorrect. Try again. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate $enter a dollar amount per direct labor hour rounded to 2 decimal places per direct labor hour LINK TO TEXT LINK TO VIDEO Your answer is incorrect. Try again. Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels $enter a dollar amount Truck wheels $enter a dollar amount LINK TO TEXT LINK TO VIDEO Your answer is correct. Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the 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 Estimated Use of Cost Drivers Estimated Overhead Costs Setting up machines 1,000 setups $243,000 Assembling 81,000 labor hours 324,000 Inspection 1,200 inspections 291,600 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines $enter a dollar amount Assembling $enter a dollar amount Inspection $enter a dollar amount

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3CE: Lansing. Inc., provided the following data for its two producing departments: Machine hours are used...

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Altex 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.

	Car	Truck
Estimated wheels produced	36,000	15,000
Direct labor hours per wheel	1	3

Total estimated overhead costs for the two product lines are $858,600.


	Your answer is incorrect. Try again.

Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.)

Overhead rate

$enter a dollar amount per direct labor hour rounded to 2 decimal places

per direct labor hour

LINK TO TEXT

LINK TO VIDEO


	Your answer is incorrect. Try again.

Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs.

Car wheels		$enter a dollar amount
Truck wheels		$enter a dollar amount

LINK TO TEXT

LINK TO VIDEO


	Your answer is correct.

Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the 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	Estimated Use of Cost Drivers		Estimated Overhead Costs
Setting up machines	1,000	setups		$243,000
Assembling	81,000	labor hours		324,000
Inspection	1,200	inspections		291,600

Compute the activity-based overhead rates for these three cost pools.

		Overhead Rates
Setting up machines		$enter a dollar amount
Assembling		$enter a dollar amount
Inspection		$enter a dollar amount


LINK TO TEXT	LINK TO VIDEO


	Your answer is incorrect. Try again.

Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information.

Estimated Use of Cost Drivers per Product
	Car	Truck
Number of setups	200	800
Direct labor hours	36,000	45,000
Number of inspections	100	1,100

	Car Wheels	Truck Wheels
Setting up machines	$enter a dollar amount	$enter a dollar amount
Assembling	$enter a dollar amount	$enter a dollar amount
Inspection	$enter a dollar amount	$enter a dollar amount
Total cost assigned	$enter a total amount	$enter a total amount

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