Question

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 39,000 11,000 1 3 Total estimated overhead costs for the two product lines are $835,200.

Answer 1

Activity	Activity rate (i)	Use of activity by car wheels (ii)	Cost allocated to car wheels (i x ii)	Use of activity of truck wheels (iii)	Cost allocated to truck wheels (i x iii)
Setting up machine	216	200	43,200	800	178,800
Assembling	5	39,000	195,000	33,000	165,000
Inspection	216	100	21,600	1,100	237,600
Total			$259,800		$581,400

	Car wheel	Truck wheel
Setting up machines	43,200	178,800
Assembling	195,000	165,000
Inspection	21,600	237,600
Total assigned cost	$259,800	$581,400

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