Question

Greenwood 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	$	192,000	10,000	MHs
Machine setups	Number of setups	$	50,400	120	setups
Production design	Number of products	$	76,000	2	products
General factory	Direct labor-hours	$	387,200	16,000	DLHs

Activity Measure	Product Y	Product Z
Machining	6,200	3,800
Number of setups	50	70
Number of products	1	1
Direct labor-hours	7,200	8,800

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your answers to 2 decimal places.) Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.) Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.) Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.) Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)

Answer 1

First Step: Calculate Rate per activity as below
Activity	OH	Total MHS	Rate
Machining	192000	10000	19.20
Machine Setup	50400	120	420.00
Product Design	76000	2	38,000.00
General Factory	387200	16000	24.20
Cost Allocation to Product Y = Product Y activity multiplied by Rate arrrived as per above
Activity Measure	Product Y	Rate	Cost Allocation
Machining	6200	19.20	119040
Number of setup	50	420.00	21000
Number of Product	1	38,000.00	38000
Direct labor hours	7200	24.20	174240
			352280
Cost Allocation to Product Z = Product Z activity multiplied by Rate arrrived as per above
Activity Measure	Product Y	Rate	Cost Allocation
Machining	3800	19.20	72960
Number of setup	70	420.00	29400
Number of Product	1	38,000.00	38000
Direct labor hours	8800	24.20	212960
			353320
Plant wide overhead rate = Total overhead divided by total direct labor hours
Total Overhead	705600
Labor hours	16000
Plant wide overhead rate	44.10
		%
Cost Allocation to Y	317520	45.00%
Cost Allocation to Z	388080	55.00%
	705600
Machining cost assigned	Machining cost	%
Product Y	119040	62%
Product Z	72960	38%
	192000
setup cost assigned	Set up cost	%
Product Y	21000	42%
Product Z	29400	58%
	50400
Design Cost	Design cost	%
Product Y	38000	50%
Product Z	38000	50%
	76000
General Factory overhead	General factory overhead	%
Product Y	174240	45%
Product Z	212960	55%
	387200