In: Accounting
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).