Question

Hickory Company manufactures two products—15,000 units of Product Y and 7,000 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 $674,000 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	$	216,700	11,000	MHs
Machine setups	Number of setups	$	79,900	170	setups
Product design	Number of products	$	81,000	2	products
General factory	Direct labor-hours	$	296,400	13,200	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	6,700	4,300
Number of setups	60	110
Number of products	1	1
Direct labor-hours	7,700	5,500
1. What is the company’s plantwide overhead rate? 2. Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? 3. What is the activity rate for the Machining activity cost pool? 4. What is the activity rate for the Machine Setups activity cost pool? 5. What is the activity rate for the Product Design activity cost pool? 6. What is the activity rate for the General Factory activity cost pool? 7. Which of the four activities is a batch-level activity? Product design activity Machining activity General factory activity Machine setups activity 8. Which of the four activities is a product-level activity? Machining activity Product design activity Machine setups activity General factory activity 9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? 10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? 11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? 12. Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? 13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? 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? Thank you

Answer 1

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