FINC 577 Chapter 4 Notes Outline

Car estimated wheels produced direct labor hours per

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Unformatted text preview: Total estimated overhead costs for the two product lines are $700,000. Chapter 4-30 Example 2 Instructions Instructions (a) Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. costs. Chapter 4-31 Example 2 Instructions (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. activitypools. Chapter 4-32 Example Example 2 Instructions Instructions (c) Compute the cost that is assigned to the ca...
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