Question

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 $ 231,000 $ 180,000 $ 94,000 $ 260,000 Expected Activity 11,000 MHs 300 setups 2 products 10,000 DLHS Activity Measure Machining Number of setups Number of products Direct labor hours Product Y Product Z 8,000 3,000 60 240 9,000 1,000

Answer 1

ACTIVITY BASED MEASURE
activity measure	estimated overhead cost	expected activity	per unit
	A	B	A/B
machine hours	231000	11000	21
number of set ups	180000	300	600
Number of products	94000	2	47000
Direct Labour Hours	260000	10000	26
ALLOCATION OF OH COST TO PRODUCT Y
	ACTIVITY	PER UNIT	TOTAL
PARTICULARS	A	B	A*B
machine hours	8000	21	168000
number of set ups	60	600	36000
Number of products	1	47000	47000
Direct Labour Hours	9000	26	234000
TOTAL OH COST			485000