Question

Hickory 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
Machine-hours   7,000   3,000
Number of setups   50   150
Number of products   1   1
Direct labor-hours   8,000   4,000

1. What is the company’s plantwide overhead rate?

2.Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z?

3. What is the activity rate for the Machining activity cost pool?

4. What is the activity rate for the Machine Setups activity cost pool?

5. What is the activity rate for the Product Design activity cost pool?

6. What is the activity rate for the General Factory activity cost pool?

7. Which of the four activities is a batch-level activity?

   General factory activity
   Product design activity
   Machine setups activity
   Machining activity

8. Which of the four activities is a product-level activity?

Machining activity
   Product design activity
   Machine setups activity
   General factory activity

9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Do not round intermediate calculations.)

10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Do not round intermediate calculations.)

11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your "Percentage" answers to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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

13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z?

14. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z?

15. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your "Percentage" answers to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Answer 1

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Hickory
Total Manufacturing overhead	Amount $	Note
Machining	200,000.00
Machine setups	100,000.00
Production design	84,000.00
General factory	300,000.00
Total Manufacturing overhead	684,000.00	A
Answer 1
Calculation of Plant wide OH Rate	Amount $
Manufacturing overhead	684,000.00	A
Labor Hours	12,000.00	B
Predetermined OH Rate	57.00	C=A/B

Answer 2
OH Allocated	Product Y	Product Z	Note
Labor Hours	8,000.00	4,000.00	D
Predetermined OH Rate	57.00	57.00	See C
Allocated OH	456,000.00	228,000.00	E=C*D

Answer 3 to 6
Calculation of ABC rates for overhead	F		G	H=F/G
Activity cost pool	Cost	Cost Driver	Activity usage	ABC rates
Machining	200,000.00	Machine-hours	10,000.00	20.00
Machine setups	100,000.00	Number of setups	200.00	500.00
Production design	84,000.00	Number of products	2.00	42,000.00
General factory	300,000.00	Labor Hours	12,000.00	25.00
Total Cost assigned	684,000.00

Answer 7

Product design activity

Answer 8

Product design activity

Answer 9
Product Y	See H	I	J=H*I
Activity cost pool	ABC Rates	Activity used	Cost assigned
Machining	20.00	7,000.00	140,000.00
Machine setups	500.00	50.00	25,000.00
Production design	42,000.00	1.00	42,000.00
General factory	25.00	8,000.00	200,000.00
Total cost assigned			407,000.00
Answer 10
Product Z	See H	K	L=H*K
Activity cost pool	ABC Rates	Activity used	Cost assigned
Machining	20.00	3,000.00	60,000.00
Machine setups	500.00	150.00	75,000.00
Production design	42,000.00	1.00	42,000.00
General factory	25.00	4,000.00	100,000.00
Total cost assigned			277,000.00
Answer 11	Product Y	Product Z	Total
Allocated OH	456,000.00	228,000.00	684,000.00
Allocated OH %	66.67%	33.33%	100.00%
Answer 12	Product Y	Product Z	Total
Machining	140,000.00	60,000.00	200,000.00
Allocation %	70.00%	30.00%	100.00%
Answer 13	Product Y	Product Z	Total
Machine setups	25,000.00	75,000.00	100,000.00
Allocation %	25.00%	75.00%	100.00%
Answer 14	Product Y	Product Z	Total
Production design	42,000.00	42,000.00	84,000.00
Allocation %	50.00%	50.00%	100.00%
Answer 15	Product Y	Product Z	Total
General factory	200,000.00	100,000.00	300,000.00
Allocation %	66.67%	33.33%	100.00%