Question

Hickory 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   $   242,400   12,000   MHs
Machine setups   Number of setups   $   114,400   220   setups
Production design   Number of products   $   86,000   2   products
General factory   Direct labor-hours   $   302,400   14,400   DLHs

Activity Measure   Product Y   Product Z
Machine-hours   7,200   4,800
Number of setups   40   180
Number of products   1   1
Direct labor-hours   8,200   6,200

9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)

10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)

11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your "Percentage" answers to 2 decimal places. (i.e. 0.1234 should be entered as 12.34).)

12. Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your "Percentage" answers to 2 decimal places. (i.e. 0.1234 should be entered as 12.34).)

13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your "Percentage" answers to 2 decimal places. (i.e. 0.1234 should be entered as 12.34).)

14. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z? (Round your "Percentage" answers to 2 decimal places. (i.e. 0.1234 should be entered as 12.34)).

15. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your "Percentage" answers to 2 decimal places. (i.e. 0.1234 should be entered as 12.34).)

Answer 1

Given Information
Products Y and Z:
Activity Cost Pool	Activity Measure	Overhead Cost in $	Expected Activity
Machining	Machine Hours	2,42,400	12000 MHS
Machine setups	Number of setups	1,14,400	220 Setups
Production Design	Number of Products	86,000	2 Products
General factory	Direct labour hours	3,02,400	14400 DLHs
Calculation of Rate per activity
Activity Measure	Product Y	Product Z	Total	Estimated OH Cost in $	Cost per activity
Machine Hours	7200	4,800	12,000	2,42,400	20.20
Number of setups	40	180	220	1,14,400	520
Number of Products	1	1	2	86,000	43,000
Direct labour hours	8200	6,200	14,400	3,02,400	21
Cost Allocation and percentage of costs
Cost allocation	Product Y	Percentage part of Y	Product Z	Percentage part of Z	Total
Machining Costs	1,45,440.00	60%	96,960.00	40%	2,42,400.00
Machine setups costs	20,800.00	18%	93,600.00	82%	1,14,400.00
Production Design costs	43,000.00	50%	43,000.00	50%	86,000.00
General factory costs	1,72,200.00	57%	1,30,200.00	43%	3,02,400.00
	3,81,440.00		3,63,760.00		7,45,200.00