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Unformatted text preview: Total estimated overhead costs for the two
product lines are $700,000.
4-30 Example 2
(a) Compute the overhead cost assigned to the car
wheels and truck wheels, assuming that direct
labor hours is used to allocate overhead costs.
4-31 Example 2
(b) Kruegel is not satisfied with the traditional method of allocating
overhead because he believes that most of the overhead costs
relate to the truck wheel product line because of its complexity.
He therefore develops the following three activity cost pools and
related cost drivers to better understand these costs.
costs. Activity Cost Pools Expected Use of
Cost Drivers Estimated Overhead
Cost Setting up machines 1,000 setups $180,000 Assembling 70,000 labor hours 280,000 Inspection 1,200 inspections 240,000 Compute the activity-based overhead rates for these three cost pools.
(c) Compute the cost that is assigned to the ca...
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- Winter '14