Reference no: EM133065776

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.