Question

Required information Greenwood 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 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 $ 227,700 $ 153,900 $ 91,000 $ 257,000 Expected Activity 11,000 MHs 270 setups 2 products 10,000 DLHS Product Y 8,700 Activity Measure Machining Number of setups Number of products Direct labor-hours Product Z 2,300 210 60 8,700 1,300

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to the nearest dollar amount.)

Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.)

Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.)

Answer 1

Allocation of overhead using ABC system :
	Overhead allocated
	Product Z
Machining	47610 [ 227700 * 2300 / 11000 ]
Machine setup	119700 [ 153900 * 210 / 270 ]
Production design	45500 [ 91000 * 1 / 2 ]
General factory	33410 [ 257000 * 1300 / 10000 ]
Total manufacturing overhead cost assigned	246220

Using the plantwide overhead rate :

Total estimated overhead cost = 227700 + 153900 + 91000 + 257000	729600
Plantwide predetermined overhead rate = Total estimated overhead cost / Total estimated direct labor hours = 729600 / 10000	72.96

	Product Y	Product Z
Overhead cost allocated [ Plantwide predetermined overhead rate * Estimate direct labor hours ]	634752 [ 72.96 * 8700 ]	94848 [ 72.96 * 1300 ]

	Product Y	Product Z
Percentage of Total overhead cost allocated [ Overhead cost allocated / Total estimated overhead cost ]	87.00% [ 634752 / 729600 ]	13.00% [ 94848 / 729600 ]

Using ABC costing :

Allocation of overhead using ABC system :
		Overhead allocated
	Estimated overhead cost	Product Y	Product Z
Machining	227700	180090 [ 227700 * 8700 / 11000 ]	47610 [ 227700 * 2300 / 11000 ]

	Product Y	Product Z
Percentage of Machining cost allocated [ Machining cost allocated / Total estimated machining cost ]	79.09% [ 180090 / 227700 ]	20.91% [ 47610 / 227700 ]