Question

Required information 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 $ 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 7,000 40 Product Z 5,000 60 7,000 5,000

6. What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.)

7. Which of the four activities is a batch-level activity?

8. Which of the four activities is a product-level activity?

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

10. 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.)

11. 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.)

Answer 1

6. Activity rate for the General Factory activity cost pool = $288000/12000 = $24 per DLH

7. Machine setup is batch-level activity

8. Production design is product-level activity

9.

Activity	Cost	Cost Driver		Cost per Cost driver
Machining	$       228,000	12000	# of machine hours	$             19	per MH
Machine Setups	$          40,000	100	# of setups	$          400	per setup
Production Design	$          74,000	2	# of products	$    37,000	per product
General Factory	$       288,000	12000	# of Direct labor hours	$             24	per DLH
Total	$       630,000

Overhead allocated to Product Y

Overhead allocated
Machining	$       133,000	=7000*19
Machine Setups	$          16,000	=40*400
Production Design	$          37,000	=37000*1
General Factory	$       168,000	=7000*24
Total	$       354,000

10. Overhead allocated to Product Z

Overhead allocated
Machining	$          95,000	=5000*19
Machine Setups	$          24,000	=60*400
Production Design	$          37,000	=37000*1
General Factory	$       120,000	=5000*24
Total	$       276,000

11.
Percentage of total overhead allocated to Product Y = 7000/12000 x 100 = 58.33%
Percentage of total overhead allocated to Product Z = 5000/12000 x 100 = 41.67%