Man 3 4

1-Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Total estimated oh cost for the two product lines are 770,000. Car Truck SOL FOR A) DL.hours for car wheels=40,000*1=40,000
Estimated wheels produced 40,000 30,000 dl hours for t. wheels= 10,000*3=30,000 ( 70,000 tot.dl hours.)
DL Hour per wheels 1 3 770,000/70,000=11$per dl hours. Oh assigned= for car w. 40,000*11=440,000 truck: 30,000*11=330,000 Total OH= 770,000(440,000+330,000)
Questions: a) Compute the OH cost assigned to the car wheels and truck wheels, assuming that dl hours is used to allocate oh costs.
d) Hermann isn’t satisfied with the trad. Meth. Of allocating OH coz he believes that most of the OH costs relate to truck wheel product line cos of its complexity. He develops the following three activity cost pools and related cost drivers to better understand these costs.
Solution B
220,000/1000=220$ ABC OH RATE
280,000/70,000=5$ ABC OH RATE
270,000/1200=225$ ABC OH RATE
Compute the activity based OH rates for these three cost pools.
c)compute the cost that is assigned to the car wheels and truck wheels pro. lines using an activity based costing system,given following info
Expected use of cost drivers per product:
Solution c)

200*220=44,000 cost assigned
40,000*4= 160,000
100*225= 22,500 total cost assigned is 226,500
2) the lady sells window covers to both comm. and residential customers.following info relates to its budgeted operations for the current year. Commercial Residential
Revenues 300,000 480,000
DM costs 30,000 50,000
DL costs 100,000 300,000
OH Costs 85,000 215,000 150,000 500,000
Operating income( loss) 85,000