Question

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 $788,400 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	$	238,800	12,000	MHs
Machine setups	Number of setups	$	93,100	190	setups
Product design	Number of products	$	83,000	2	products
General factory	Direct labor-hours	$	373,500	14,400	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	6,900	5,100
Number of setups	40	150
Number of products	1	1
Direct labor-hours	7,900	6,500

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 2 decimal place.)

Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your "Percentage" 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 "Percentage" answers to 2 decimal places.)

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

Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your "Percentage" answers to 2 decimal place.)

Answer 1

Overhead Rate as per Traditional costing =$788,400 / 14,400 =$54.75 per direct labor hours
	Product Y	Product Z
Overhead Rate as per Traditional costing	$                                54.75	$                                       54.75
Direct labor Hours	7900	6500
Allocated Overhead Costs	$                           4,32,525	$                                  3,55,875
Percentage allocated	54.86%	45.14%
Computation of ABC rate
Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)
Machining	$                           2,38,800	12,000	$                                 19.90000	per machine hrs.
Machine Setups	$                              93,100	190	$                               490.00000	per setup hrs
Product design	$                              83,000	2	$                          41,500.00000	per product
General Factory	$                           3,73,500	14,400	$                                 25.93750	per DLHs
Total Cost	$                           7,88,400
	Product Y	Product Z
	Activity Based usage	Activity Based usage*ABC rate	Activity Based usage	Activity Based usage*ABC rate
Machining	6900	$                                  1,37,310	5100	$                                          1,01,490
Machine Setups	40	$                                     19,600	150	$                                             73,500
Product design	1	$                                     41,500	1	$                                             41,500
General Factory	7900	$                                  2,04,906	6500	$                                          1,68,594
Total Overhead Cost allocated		$                                  4,03,316		$                                          3,85,084
	Product Y	Product Z	Total
Activity-Based Costing System
Machining	$                           1,37,310	57.50%	$                                  1,01,490	42.50%	$                  2,38,800
Machine Setups	$                              19,600	21.05%	$                                     73,500	78.95%	$                     93,100
Product design	$                              41,500	50.00%	$                                     41,500	50.00%	$                     83,000
General Factory	$                           2,04,906	54.86%	$                                  1,68,594	45.14%	$                  3,73,500
Total Costs assigned to Products	$                           4,03,316	51.16%	$                                  3,85,084	48.84%	$                  7,88,400