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 $696,000 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	$	224,400	11,000	MHs
Machine setups	Number of setups	$	129,600	240	setups
Product design	Number of products	$	88,000	2	products
General factory	Direct labor-hours	$	254,000	13,200	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	7,400	3,600
Number of setups	60	180
Number of products	1	1
Direct labor-hours	8,400	4,800

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 your final answers to the nearest whole 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?

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? (Round your answer to 2 decimal places.)

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? (Round all intermediate calculations to 2 decimal places.)

10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z?

Answer 1

1
Plantwide overhead rate	52.73	per DLH	=696000/13200
2
Manufacturing overhead cost:
Product Y	442932		=8400*52.73
Product Z	253104		=4800*52.73
3
Machining Activity rate	20.40	per MH	=224400/11000
4
Machine Setups Activity rate	540	per setup	=129600/240
5
Product Design Activity rate	44000	per product	=88000/2
6
General Factory Activity rate	19.24	per DLH	=254000/13200
7
Machine setups activity is a batch-level activity
8
Product design activity is a product-level activity
9
Total manufacturing overhead cost Product Y	388976
10
Total manufacturing overhead cost Product Z	306992
Workings:
Product Y:
Machining	150960	=7400*20.4
Machine setups	32400	=60*540
Production design	44000
General factory	161616	=8400*19.24
Total manufacturing overhead cost	388976
Product Z:
Machining	73440	=3600*20.4
Machine setups	97200	=180*540
Production design	44000
General factory	92352	=4800*19.24
Total manufacturing overhead cost	306992