Question

Hickory 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 $813,600 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	$	249,600	12,000	MHs
Machine setups	Number of setups	$	162,400	280	setups
Product design	Number of products	$	92,000	2	products
General factory	Direct labor-hours	$	309,600	14,400	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	7,800	4,200
Number of setups	40	240
Number of products	1	1
Direct labor-hours	8,800	5,600
Required

11. 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.)

12. 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.)

13. 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.)

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

15. 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

11)plantwide overhead rate=Estimated overhead/estimated DLH

             = 813600/14400

             = $ 56.5 per DLH

overhead Y=DLH used * overhead rate

     = 8800*56.5

      = $ 497200

product Z= 5600*56.5

         = $ 316400

12)percentage of the Machining costs is assigned to Product Y = machine hours used by Y/total machine hours

= 7800/12000

= .65 or 65%

product Z= 4200/12000 = .35 or 35%

13)Machine Setups cost is assigned to Product Y = setup used by Y/total set up

                                      = 40/280 = 14 .29%

Product Z= 240/280 = 85.71%

14)percentage of the Product Design cost is assigned to Product Y = number of products ofY/total products

            = 1/2

             = .50 or 50%

product Z = 1/2

            = .50 or 50%

15)percentage of the General Factory cost is assigned to Product Y = direct labor hours used by Y/total direct labor hours

= 8800 /14400

= 61.11%

Product Z= 5600 / 14400

          = 38.89%