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

Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

Given in the question,                                                       

Total Estimated General factory Overhead Cost = 364,500

Expected Direct labor hours = 15,000

Direct labor-hours for product Y = 7,300

Direct labor-hours for product Z = 7,700

Estimated General factory Overhead rate = Total Estimated General factory Overhead Cost/ Expected Direct labor hours

=364,500/15,000   (Substituting the value from above)                      

= $24.3 per DLHs

General Factory cost for product Y = Direct labor-hours for product Y X Estimated General factory Overhead rate

                                                               = 7300 X 24.3    (Substituting the value from above)                      

                                                               = 177390

General Factory cost for product Z = Direct labor-hours for product Z X Estimated General factory Overhead rate

= 7700 X 24.3   (Substituting the value from above)                      

= 187110

Percentage of the General Factory cost= General Factory cost/ Total Estimated General factory Overhead Cost X 100

Product Y: 177390/364500 X 100 = 48.67%

Product Z: 187110/364500 X 100 = 51.33%