Question

Hickory Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all $748,800 of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost		Expected Activity
Machining	Machine-hours	$	206,000	10,000	MHs
Machine setups	Number of setups	$	145,600	260	setups
Product design	Number of products	$	90,000	2	products
General factory	Direct labor-hours	$	307,200	12,000	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	7,600	2,400
Number of setups	50	210
Number of products	1	1
Direct labor-hours	8,600	3,400

1-1. What is the company’s plantwide overhead rate?

1-2. Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z?

	Product Y	Product Z
Manufacturing overhead allocated

1-3. What is the activity rate for the Machining activity cost pool?

2-1. What is the activity rate for the Machine Setups activity cost pool?

2-2. What is the activity rate for the Product Design activity cost pool?

2-3. What is the activity rate for the General Factory activity cost pool?

Answer 1

Answer 1.

Predetermined Overhead Rate = $748,800 (Total Overhead) / 12000 DLH

Predetermined Overhead Rate = $62.40 per DLH

2:-Statement Showing Overhead Assgned to Product Y & Z - Hickory Company
Overhead Assigned	Activity Driver ( in Hour) (A)	Plantwide OH Rate (B)	Total Overhead Cost (c=AXB)
Product Y	8600	$62.40	$536,640.00
Product Z	3400	$62.40	$212,160.00

Answer 1-3, 2-1,2,3
ABC Costing
Activity	Cost Pool (A)	Activity Pool (B)		Allocation Rate A/B)
Machining	$206,000.00	10000	Machine Hour	$20.60	Per Machine Hour
Machine Setup	$145,600.00	260	No. of Setup	$560.00	Per No. of Setup
Product Design	$90,000.00	2	No. of Product	$45,000.00	Per No. of Product
General Factory	$307,200.00	12000	DLH	$25.60	Per DLH
Total	$748,800.00