Question

Question 5 --/1 View Policies Current Attempt in Progress 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 Direct labor hours per wheel 40,000 10,000 1 3 Total estimated overhead costs for the two product lines are $742,000. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate $ per direct labor hour e Textbook and Media

Answer 1

Requirement #1 HourstakenCar = Estimated Productionofwheel DirectLaborHourperwheel = 40,000 x 1 = 40,000hours Computation of total hours taken by truck: Hourstaken Truck = Estimated Productionofwheel x DirectLaborHourperwheel = 10,000 x 1 = $10,000hours Computation of total hours taken: Totalhours = Hourstaken car + Hourstaken Truck = 40,000 + 30,000 = 70,000 hours Over head rate per direct labor hour : = Total overhead cost / Total direct labor hours = 742000/70000 $10.6 per hour Requirement #2 Overhead cost allocated to car wheels: =40000x10.6 $424,000 Overhead cost allocated to truck wheels: =30000/10.6 $318,000

Requirement #3 Est. use of cost , Est. OH costs(B) OH rates (A/B) drivers (A) 1000 210000 210 Activity pools Setting up machines Assembling Inspection 70000 1200 280000 252000 210 OH rates (A/B) 210 Activity pools Setting up machines Assembling Inspection 4 4 210 Requirement #4 Est use of cost drivers(A) Car wheels OH rate as per activity based costingB) 210 AxB Est use of cost drivers(A) Truck wheels OH rate as per activity based costing(B) 210 AXB 200 42000 800 168000 4 4 Setting up machines Assembling Inspection Total cost assigned 40000 100 160000 21000 30000 1100 120000 231000 210 210 223000 519000 Car wheels Truck wheels 42000 168000 Setting up machines Assembling Inspection Total cost assigned 160000 21000 120000 231000 223000 519000