Question

Hickory company manufactures two products-14,000 units of Product Y and 6,000 units of Product Z....

-7 Homework Hickory 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 $791,400 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 Machining Machine setups Product design General factory Estimated Activity Overhead Expected Measure Cost Activity Machine- $203,000 10,000 MHS hours Number of $121,900 230 setups setups Number of $ 87,000 2 products products Direct labor $379,500 12,000 DLHS hours Activity Product Product Measure Y Z Machine- 7,300 2,700 hours Number of 50 180 setups Number of 1 1 products Direct 9,500 2,500 labor-hours Foundational 7-1 Prev 1 2 3

Answer 1

Answer 1.

Plantwide overhead rate = Estimated manufacturing overhead / Estimated direct labor hours
Plantwide overhead rate = $791,400 / 12,000
Plantwide overhead rate = $65.95 per direct labor hour

Answer 2.

Product Y:

Manufacturing overhead allocated = Plantwide overhead rate * Number of direct labor hours
Manufacturing overhead allocated = $65.95 * 9,500
Manufacturing overhead allocated = $626,525

Product Z:

Manufacturing overhead allocated = Plantwide overhead rate * Number of direct labor hours
Manufacturing overhead allocated = $65.95 * 2,500
Manufacturing overhead allocated = $164,875

Answer 3.

Activity Rate = Estimated overhead cost / Expected activity
Activity Rate = $203,000 / 10,000
Activity Rate = $20.30 per machine hour

Answer 4.

Activity Rate = Estimated overhead cost / Expected activity
Activity Rate = $121,900 / 230
Activity Rate = $530 per setup

Answer 5.

Activity Rate = Estimated overhead cost / Expected activity
Activity Rate = $87,000 / 2
Activity Rate = $43,500 per product