Question

Greenwood 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 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	$	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 labor-hours	$	300,000			12,000	DLHs

Activity Measure	Product Y			Product Z
Machining		8,000			2,000
Number of setups		40			160
Number of products		1			1
Direct labor-hours		9,000			3,000

Foundational 4-3

3. What is the activity rate for the Machining activity cost pool?

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

• Machine setups activity

• Machining activity

• General factory activity

8. Which of the four activities is a product-level activity?

• Product design activity

• Machining 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?

Answer 1

1
Pantwide overhead rate	57	per DLH	=(200000+100000+84000+300000)/12000
2
Manufacturing overhead cost:
Product Y	513000		=9000*57
Product Z	171000		=3000*57
3
Activity rate	20	per MH	=200000/10000
4
Activity rate	500	per setup	=100000/200
5
Activity rate	42000	per product	=84000/2
6
Activity rate	25	per DLH	=300000/12000
7
Machine setups activity is a batch-level activity
8
Product design activity is a product-level activity
9
Total manufacturing overhead cost	447000
10
Total manufacturing overhead cost	237000
11
Total overhead cost:
Product Y	75%	=9000/12000
Product Z	25%	=3000/12000
12
Machining costs:
Product Y	80%	=8000/10000
Product Z	20%	=2000/10000
13
Machine Setups costs:
Product Y	20%	=40/200
Product Z	80%	=160/200
14
Product Design cost:
Product Y	50%	=1/2
Product Z	50%	=1/2
15
General Factory cost:
Product Y	75%	=9000/12000
Product Z	25%	=3000/12000
Workings:
Product Y:
Machining	160000	=8000*20
Machine setups	20000	=40*500
Production design	42000
General factory	225000	=9000*25
Total manufacturing overhead cost	447000
Product Z:
Machining	40000	=2000*20
Machine setups	80000	=160*500
Production design	42000
General factory	75000	=3000*25
Total manufacturing overhead cost	237000