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. (Round answers to 0 decimal places, e.g. 1,575.) Expected Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 40,000 30,000 Number of inspections 100 1,100

Answer 1

Results are below.

Step-by-step explanation:

First, we need to calculate the activity rates. We weren't provided with the estimated costs for each activity. I will assume some costs and formulas to guide an answer.

Set up costs= $100,000

Assembly (direct labor)= $1,200,000

Inspection= $250,000

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Set up= 100,000 / 1,000= $100 per set up

Assembly= 1,200,000 / 70,000= $17.14 per direct labor hour

Inspection= 250,000 / 1,200= $208.33 per inspection

Now, we can allocate costs to each product line:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Car:

Set up= 100*200= $20,000

Assembly= 17.14*40,000= $685,600

Inspection= 208.33*100= $20,833

Truck:

Set up= 100*800= $80,000

Assembly= 17.14*30,000= $514,200

Inspection= 208.33*1,100= $229,163