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.
Car Truck
Estimated wheels produced 40,000 10,000
Direct labor hours per wheel 1 3
Total estimated overhead costs for the two product lines are $770,000.
Exercise 17-4 Altex Inc. manufactures two products
Calculate overhead rate. (Round answer to 2 decimal places, e.g. $12.25.)
Overhead rate
$
per direct labor hour
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Exercise 17-4 Altex Inc. manufactures two products
Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs.
Car wheels
$
Truck wheels
$

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facundobuzzetti facundobuzzetti · Answer 1 · 2021-02-23T01:58:03+01:00

Answer:

Results are below.

Explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Total direct labor hours= (40,000*1) + (10,000*3)= 70,000

Predetermined manufacturing overhead rate= 770,000/70,000

Predetermined manufacturing overhead rate= $11 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Car= 11*40,000

Car= $440,000

Truck= 11*30,000

Truck= $330,000