Question

Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assigning to each product line, the controller, Robert Hermann, has developed the following information.
Car Truck
Estimated wheels produced 42,000 11,000
Direct labor hours per wheel 1 3
Total estimated overhead costs for the two product lines are $863,000.
a. Calculate the overhead rate.
b. Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours are used to allocate overhead costs.

Answer 1

Answer:

Explanation:

Answer:

Total

Units Produced

42000

15000

Hours per unit

1

3

Total Hours

42000

45000

87000

So total hours required = 87000 hours

Now we will find overhead rate per hour

Total Overhead= $846.000

Overhead Rate per Hour

=$ 846000/87000

= $9.72 per Hrs.

overhead rate per hour =$ 9.72 per hour

_______________________________________

Car

Wheel

Total Hrs.

42000

45000

Hourly Rate

$9.72

$9.72

Allocated Overhead

$408414.00

$437586

_________________________________________________

Activity

No. of

Activity

Overhead Cost

Cost Per Activity

Setting up machines

1000

$215,000

$215.00

Assembling

87000

$347,000

$3.99

Inspection

1200

$284,000

$236.67

Activity

Car=A

Truck =B

Rate=C

Total $ Car=A*C

Total $ Truck=B*C

Setting up machines

200

800

$215.00

$43,000.00

$172,000.00

Assembling

42000

45000

$3.99

$167,517.24

$179,482.76

Inspection

100

1100

$236.67

$23,666.67

$260,333.33

$234,183.91

$611,816.09