Silver Wheel Hub Cap Company uses Activity Based Costing (ABC) to account for its chrome wheel cover manufacturing overhead costs: material handling, machine setup, insertion of parts, and finishing. The expected (budgeted) activity of 2012 and the basis on which overhead costs are allocated for the wheel covers are as follows:
Activity Budgeted Overhead Cost Allocation Base
Material handling $12,000 Number of parts
Machine set up 3,400 Number of setups
Insertion of Parts 48,000 Number of parts
Finishing 80,000 Finishing direct labor hours
Silver Wheel Hub Cap Company expects to produce 1,000 chrome wheel covers during 2012. The chrome wheel covers are expected to use 3,000 parts, require 10 setups and consume 2,000 hours of finishing time.
An order for Ace Wheel Cover Company, a customer, used 150 parts, required 1 setup, and consumed 120 finishing direct labor hours.
An order from Sport Wheels Inc., another customer, used 425 parts, required 2 setups and consumed 320 finishing hours.
Required:
1.Computer the cost allocation rate for each activity.
2. Computer the manufacturing overhead cost that should be assigned to the Ace wheel cover company order.
3. Computrer the manufactoring overhead that should be assinged to trhe Sports Wheel Company order.
