Question

Greenwood Company manufactures two products—15,000 units of Product Y and 7,000 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:

Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z?

Activity cost pool	activity measure	estimated overhead cost	expected activity
Machining	machine hours	216700	11000
machine setups	number of setups	79900	170
production design	number of products	81000	2
general factory	direct labor hours	247000	10000
Activity measure	product Y	product Z
machining	67000	4300
number of setups	60	110
number of products	1	1
direct labor hours	7700	2300

Answer 1

Activity cost pool	activity measure	estimated overhead cost (A)	expected activity (B)	Per Basis (C = A/B)	Product Y Activity	Product Z Activity	C x Y	C x Z
Machining	machine hours	216,700.00	11,000.00	19.70	6,700.00	4,300.00	131,990.00	84,710.00
machine setups	number of setups	79,900.00	170.00	470.00	60.00	110.00	28,200.00	51,700.00
production design	number of products	81,000.00	2.00	40,500.00	1.00	1.00	40,500.00	40,500.00
general factory	direct labor hours	247,000.00	10,000.00	24.70	7,700.00	2,300.00	190,190.00	56,810.00