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 Machining Machine setups Production design General factory Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Estimated Overhead Cost $ 231,600 $ 55,980 $ 27,000 5364,500 Expected Activity 12,000 MH 130 setups 2 products 15,00 DLHS Product Y 7,300 Product z 4.700 Activity Measure Machining Number of setups Number of products Direct labor-hours 7,300 7.700 13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.) Product Y Product Z Machine setups cost

Answer 1

Expected machine setups cost = $55,900
Expected setups = 130

Predetermined overhead rate = Expected machine setups cost / Expected setups
Predetermined overhead rate = $55,900 / 130
Predetermined overhead rate = $430.00 per setup

Product Y:

Machine setups cost assigned = Predetermined overhead rate * Number of setups
Machine setups cost assigned = $430.00 * 40
Machine setups cost assigned = $17,200

Percentage of machine setups cost assigned = Machine setups cost assigned / Expected machine setups cost
Percentage of machine setups cost assigned = $17,200 / $55,900
Percentage of machine setups cost assigned = 30.77%

Product Z:

Machine setups cost assigned = Predetermined overhead rate * Number of setups
Machine setups cost assigned = $430.00 * 90
Machine setups cost assigned = $38,700

Percentage of machine setups cost assigned = Machine setups cost assigned / Expected machine setups cost
Percentage of machine setups cost assigned = $38,700 / $55,900
Percentage of machine setups cost assigned = 69.23%