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		7,300			4,700
Number of setups		40			90
Number of products		1			1
Direct labor-hours		7,300			7,700

9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places. Round your answers to the nearest dollar amount.)

Answer 1

Activity cost pool	Activity Measure	Estimated Overhead Cost	Expected Activity	Predetermined overhead rate [ Estimated overhead cost / Expected activity ]
Machining	Machine-hours	$231,600	12,000 MHs	$19.3 per MH
Machine setups	Number of setups	$55,900	130 setups	$430 per setup
Production design	Number of products	$77,000	2 products	$38,500 per product
General factory	Direct labor-hours	$364,500	15,000 DLHs	$24.3 per DLH

Let us now calculate the total manufacturing overhead cost that would be assigned using the Activity Based Costing (ABC) system to Product Y :

Activity cost pool	Activity measure	Expected activity of product Y (A)	Predetermined overhead rate (B)	Manufacturing overhead cost assigned to product Y ( A * B )
Machining	Machine-hours	7,300 MHs	$19.3 per MH	$140,890
Machine setups	Number of setups	40 setups	$430 per setup	$17,200
Production design	Number of products	1 product	$38,500 per product	$38,500
General factory	Direct labor-hours	7,300 DLHs	$24.3 per DLH	$177,390
Total				$373,980