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Question - Case - Car Tools Pty Ltd has five activity cost pools and two products. It expects to produce 200,000 units of its automobile scissors jack and 80,000 units of its truck hydraulic jack. Having identified its actitivy cost pools and the cost drivers for each cost pool, Car tools Pty Ltd accumulated the following data relative to those activity cost pools and cost drivers.
Annual overhead data
Activity cost pools
Cost drivers
Estimated overhead
Ordering and receiving
Purchase orders
$200,000
Machine setup
Setups
$600,000
Machining
Machine hours
$2,000,000
Assembling
Parts
$1,800,000
Inspecting and testing
Tests
$700,000
Total
$5,300,000
Expected use of cost drivers per product
Expected use of cost driver per activity
Scissors Jacks
Hydraulic Jacks
2,500 orders
1,000
1,500
1,200 orders
500
700
800,000 hours
300,000
500,000
3,000,000 parts
1,800,000
1,200,000
35,000 tests
20,000
15,000
Required - Using the above data, do the following:
1. Prepare a schedule showing the computation of the activity-based costing overhead rate per cost driver.
2. Prepare a schedule assigning each activity's overhead cost to the two products.
3. Compute and describe the overhead cost per unit for each product.
4. Explain on the comparative overhead cost per unit.
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