Roadmaster Tires Produces a Variety of Auto and Truck Tires

question 14

Essay

Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant.The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines.The costs and cost drivers associated with four activity cost pools are given below:
Production of 1,000 units of a small tractor tire required 200 labor hours and two setups and consumed 10% of the product sustaining activities.
Required:
1)Instead of using ABC,suppose the company had used labor hours as a company-wide allocation base.How much total overhead would have been allocated to the tractor tire?
2)How much total overhead cost will be allocated to the tire under activity-based costing?
3)What price will be quoted if the product is priced at 25% above cost? Compute the price under both the direct labor hours approach and under activity-based costing.The direct manufacturing costs consist of direct material of $20 and direct labor of $30.
4)What implications does ABC have on a company that bids on contracts using the costing approach described in Requirement 3?

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Definitions:

Presenteeism

The act of attending work while sick or unable to perform tasks effectively, often leading to decreased productivity and potential health risks for others.

Presenteeism

The act of attending work while sick, resulting in reduced productivity and potentially spreading illness to others.

Mindfulness

A state of mind attained by directing attention to the current moment, peacefully recognizing and accepting one's emotions, thoughts, and physical sensations.

Present Moment

The current point in time, often emphasized in mindfulness practices as a focus for awareness and engagement, free from distraction by past or future concerns.