Question

Greenwood 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 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	$	238,800	12,000	MHs
Machine setups	Number of setups	$	93,100	190	setups
Production design	Number of products	$	83,000	2	products
General factory	Direct labor-hours	$	373,500	15,000	DLHs

  

Activity Measure	Product Y	Product Z
Machining	6,900	5,100
Number of setups	40	150
Number of products	1	1
Direct labor-hours	7,900	7,100

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 Product design activity General factory activity Machine setups activity

Answer 1

Ans.1	Plantwide overhead rate   =    Total estimated overhead cost / Total direct labor hours
				788400 / 15000
				$52.56
	*Total estimated overhead cost = Machining + Machine setups + Production design + General factory
				238800 + 93100 + 83000 + 373500
				788400
Ans.2	Allocated Cost =			Direct labor hours * plantwide overhead rate
	Product Y	7900 * 52.56		415224
	Product Z	7100 * 52.56		373176
Ans.3	Activity rate for machining activity cost pool   =   Estimated overhead cost of machining / Machine hours
					238800 / 12000
					$19.9
Ans.4	Activity rate for machine setups activity cost pool   =   Estimated overhead cost of machine setups / Number of setups
					93100 / 190
					$490
Ans.4	Activity rate for Product design activity cost pool   =   Estimated overhead cost of product design / Number of products
					83000 / 2
					$41500
Ans.5	Activity rate for General factory activity cost pool   =   Estimated overhead cost of general factory / Direct labor hours
					373500 / 15000
					$24.9
Ans.6	Machine setups Activity.
	Machine setups activity is based on setups or batches.
Ans.7	Product design Activity.
	Product design activity is based on number of products or product level.