Question

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 Direct labor hours 200 40,000 100 800 27,000 1.100 Number of inspections Car Wheels Truck Wheels Setting up machines $ Assembling Inspection Total cost assigned

Answer 1

Activity cost pools	Estimated use of cost drivers	Estimated overhead costs	Overhead rates (i)	Cost driver used by car (ii)	Cost assigned to car (i) x (ii)	Cost driver used by truck (iii)	Cost assigned to truck (i) x (iii)
Setting up machines	1,000 setups	$268,000	268,000/1,000 = $268 per setup	200	268 x 200 = $53,600	800	268 x 800 = $214,400
Assembling	67,000 labor hours	$268,000	268,000/67,000 = $4 per labor hour	40,000	4 x 40,000 = $160,000	27,000	4 x 27,000 = $108,000
Inspection	1,200 inspections	$241,200	241,200/1,200 = $201 per inspection	100	201 x 100 = $20,100	1,100	201 x 1,100 = $221,100
Total					$233,700		$543,500

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