FINC 577 Chapter 4 Notes Outline

Chapter 4 32 example example 2 instructions

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Unformatted text preview: r wheels and truck wheels product lines using an activity-based activitycosting system, given the following information. Expected Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 40,000 30,000 100 1,100 Number of inspections Chapter 4-33 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. Chapter 4-34 Example 2 Instructions 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 4-35 Example 2 Chapter 4-36 Example Example 2 Instructions Instructions (c) Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based activitycosting system, given the following information. Expected Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 40,000 30,000 100 1,100 Number of inspections Chapter 4-37 Example 2 Chapter 4-38 Example Example 2 Chapter 4-39...
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This document was uploaded on 01/19/2014.

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