Question

Greenwood 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 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	$	200,000	10,000	MHs
Machine setups	Number of setups	$	100,000	200	setups
Production design	Number of products	$	84,000	2	products
General factory	Direct labor-hours	$	300,000	12,000	DLHs

  

Activity Measure	Product Y	Product Z
Machining	8,000	2,000
Number of setups	40	160
Number of products	1	1
Direct labor-hours	9,000	3,000

a.	Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z?

b.	Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z?

c.	Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z?

Answer 1