Question

Greenwood Company manufactures two products—13,000 units of Product Y and 5,000 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 $ 231,600 12,000 MHs Machine setups Number of setups $ 55,900 130 setups Production design Number of products $ 77,000 2 products General factory Direct labor-hours $ 364,500 15,000 DLHs Activity Measure Product Y Product Z Machining 6,300 5,700 Number of setups 40 90 Number of products 1 1 Direct labor-hours 7,300 7,700

1.

What is the company’s plantwide overhead rate? (Round your answer to 2 decimal places.)

2.

Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

3.

What is the activity rate for the Machining activity cost pool?(Round your answer to 2 decimal places.)

4.

What is the activity rate for the Machine Setups activity cost pool? (Round your answer to 2 decimal places.)

5.

What is the activity rate for the Product Design activity cost pool? (Round your answer to 2 decimal places.)

6.	What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.)

Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

.

Answer 1

Solution

1.

Plant wide overhead rate:

Total estimated overhead cost(a)= $231,600+$55,900+$77,000+$364,500

=$729,000

Total expected direct labour hours (b)=15,000 DLHs

Predetermined overhead rate(a/b)=$729,000/15,000

=$48.60 per DLh

2.

The overhead cost assigned to Product Y and Product Z:

	Product Y	Product z
Total direct labor hours(a)	7300	7700
Plant wide overhead rate per DLH(b)	$48.60	$48.60
Manufacturing overhead assigned (a×b)	$354,780	$374,220

3.

Activity rate =estimated overhead cost/expected activity

Activity rate for Machining cost pool=$231,600/12,000 Mh

=$19.3 per Mh

4.

Activity rate for Machine set ups =$55,900/130 set ups

=$430 per set up

5.

Activity rate for product design=$77,000/2 products

=$38,500 per product

6.

Activity rate for General factory=$364,500/15,000 DLH

=$24.30 per DLH