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: Estimated Overhead Activity Measure Machine-hours Activity Cost Pool Machining Machine setups Production design General factory Number of setups Number of products Direct labor-hours $228,000 $ 40,000 $ 74,000 $288,000 Expected Activity 12,000 MHs 100 setups 2 products 12,000 DLHs Activity Measure Machining Number of setups Number of products Direct labor-hours Product Y Product Z 6,000 6,000 40 60 7,000 5,000

Answer 1

Activity Cost pool Activity Measure А activity cont pool Activity Mansure Estimated Overhead cost Expected Activity Activity rate B/C Estimated Overhand cont Espected activity Activly rate 12000 100 Machining Machine hours Machine setups Number of setups Production Design Number of Products General Factory Direct-Labor hours 228000 40000 74000 288000 19 400 37000 24 12000 Number of units of Product Y produced = 13,000 units Computation of Manufacturing Overhead that would be assigned to Product Y Activity Measure Activity Activity rate Cost 6000 40 Machining Machine setups Production Design General Factory 19 400 37000 1,14,000 16,000 37,000 1,68,000 7000 Total Manufacturing Overhead cost = 3,35,000

Total Manufacturing Overhead Cost = $335,000