Question

Greenwood 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 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	$	213,400	11,000	MHs
Machine setups	Number of setups	$	61,600	140	setups
Production design	Number of products	$	78,000	2	products
General factory	Direct labor-hours	$	244,000	10,000	DLHs

  

Activity Measure	Product Y	Product Z
Machining	6,400	4,600
Number of setups	60	80
Number of products	1	1
Direct labor-hours	7,400	2,600

Required:

1.	What is the company’s plantwide overhead rate? (Round your answer to 2 decimal places.)

2.	Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

3.	What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)

4.	What is the activity rate for the Machine Setups activity cost pool? (Round your answer to 2 decimal places.)

5.	What is the activity rate for the Product Design activity cost pool? (Round your answer to 2 decimal places.)

6.	What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.)

7.	Which of the four activities is a batch-level activity?
	Machining activity General factory activity Product design activity Machine setups activity

8.	Which of the four activities is a product-level activity?
	Machining activity Machine setups activity Product design activity General factory activity

9.	Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

10.	Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

11.	Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your answers to 2 decimal places.)

12.	Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your 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 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? (Round your answers to 2 decimal places.)
15. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)

Answer 1

1)	Plantwide overhead rate
	Estimated overhead/estimated direct labor hours
	Estimated overhead
	machining			213,400
	machine setups			61,600
	product desing			78,000
	General factory			244,000
	total estimated overhead			597,000
	overhead rate =		597000/10000
		59.7	answer
2)	overhead allocated to product Y   = 59.7*7400
				441780
		product Z           = 59.7*2600
			155220	answer
3)	Machining activity cost pool = 213,400/11000
				19.40	answer
4)	machine setups activity cost pool = 61600/140
				440	per setup answer
5)	product design activity cost pool = 78000/2
				39000	per product answer
6)	General factory cost activity pool = 244,000/10,000
				24.4	per hour
7)	option c)
	machine setups activity
8)	option b)
	product design activity
9)	manufacturing overhead cost allocated to product Y
	Activity		Rate	driver	total
	Machining		19.40	6,400	124160
	Machine setups		440	60	26400
	production design		39,000	1	39000
	General factory		24.4	7,400	180560
	total manufacturing overhead cost				370120
10)	allocated to Z
	Activity		Rate	driver	total
	Machining		19.40	4,600	89240
	Machine setups		440	80	35200
	production design		39,000	1	39000
	General factory		24.4	2,600	63440
	total manufacturing overhead cost				226880
11)	allocated to product Y =			441780/597,000
				74.00%
	allocated to product Z =			155220/597000
				26.00%
12)	machining costs
	allocated to product Y =			124160/213,400
				58.18%
	allocated to product Z =			89240/213400
				41.82%
13)	Machine costs
	allocated to product Y =			26400/61600
				42.86%
	allocated to product Z =			35200/61600
				57.14%
14)	product design
	allocated to product Y =			39,000/78000
				50.00%
	allocated to product Z =			39,000/78000
				50.00%
15)	General Factory
	allocated to product Y =			180,560/244,000
				74.00%
	allocated to product Z =			63440/244000
				26.00%