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 labour-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 labour-hours           $300,000               12,000 DLHs

Activity Measure        Product Y        Product Z

Machining                       7,000              3,000

Number of setups                50                150

Number of products              1                   1

Direct labour-hours        8,000             4,000

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y?

A) $277,000

B) $340,000

C) $332,000

D) $407,000

E) $684,000

Enter only the letter of the correct response in the space below (i.e. A, B, C, D, or E)

Answer 1

Answer : D

Activity Cost pool	Activity Measure	Estimated Overhead Cost  (A)	Expected Activity(B)	Cost per each activity(A/B)=C	Product Y Activity Consumption(D)	Cost(C*D)
Machining	Machine-hours	200,000.00	10,000 MHs	20.00	7000	140,000.00
Machine setups	Number of setups	100,000.00	200 setups	500.00	50	25,000.00
Production design	Number of products	84,000.00	2 products	42,000.00	1	42,000.00
General factory	Direct labour-hours	300,000.00	12,000 DLHs	25.00	8000	200,000.00
Total	407,000.00