Question

2nd question part 4

he Foundational 15 [LO7-1, LO7-3, LO7-4]

[The following information applies to the questions displayed below.]

Hickory 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 $684,000 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	$	235,200	12,000	MHs
Machine setups	Number of setups	$	73,600	160	setups
Product design	Number of products	$	80,000	2	products
General factory	Direct labor-hours	$	295,200	14,400	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	6,600	5,400
Number of setups	40	120
Number of products	1	1
Direct labor-hours	7,600	6,800

13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your "Percentage" 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?

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

Answer 1

Question 13

Solution

	Product Y	Product Z
Machine Setups	25.00%	75.00%

Question 14

Solution

	Product Y	Product Z
Product design	50.00%	50.00%

Question 15

Solution

	Product Y	Product Z
General factory	52.78%	47.22%

Working

Cost Drivers Rate
Activity	Cost Drivers	Total Activity Amount (A)	Level of Activity (B)	Activity Rate (C=A/B)
Machining	Machine hours	$    235,200.00	12000.00	$         19.60	per machine hour
Machining setups	Number of setups	$       73,600.00	160.00	$       460.00	per setup
Product design	Number of products	$       80,000.00	2.00	$ 40,000.00	per product
General factory	Direct labor hours	$    295,200.00	14400.00	$         20.50	per labor hour

.

Overhead applied to (Product Y)
Product Y	Activity rate(A)	Activity Driver Incurred (B)	Overhead Assigned (C=A*B)
Machining	$             19.60	6600	$ 129,360.00
Machining setups	$           460.00	40	$     18,400.00
Product design	$     40,000.00	1	$     40,000.00
General factory	$             20.50	7600.00	$ 155,800.00
Total Overheads applied			$ 343,560.00

.

Overhead applied to (Product Z)
Product Z	Activity rate(A)	Activity Driver Incurred (B)	Overhead Assigned (C=A*B)
Machining	$             19.60	5400	$ 105,840.00
Machine Setups	$           460.00	120	$     55,200.00
Product design	$     40,000.00	1	$     40,000.00
General factory	$             20.50	$         6,800.00	$ 139,400.00
Total Overheads			$ 340,440.00

.

Overhead per unit as per ABC system					Total Overheads
	Product Y		Product Z		Total
Machining	$ 129,360.00	55.00%	$ 105,840.00	45.00%	$   235,200.00	100%
Machine Setups	$     18,400.00	25.00%	$     55,200.00	75.00%	$     73,600.00	100%
Product design	$     40,000.00	50.00%	$     40,000.00	50.00%	$     80,000.00	100%
General factory	$ 155,800.00	52.78%	$ 139,400.00	47.22%	$   295,200.00	100%