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

1. What is the company’s plantwide overhead rate? (Round your answer to 2 decimal places.)

2. Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to the nearest dollar amount.)

3. What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)

4. What is the activity rate for the Machine Setups activity cost pool?

5. What is the activity rate for the Product Design activity cost pool?

Answer 1

1) Plantwide overhead rate is = Estimated overhead costs/Total direct labor hours Plantwide overhead rate is = (228000-40000-74000+288000/12000 Plantwide overhead rate is = $ 52.50 per direct labor hour 2) Manufacturing cost allocated to Product Y is = (Direct labor hours consumed by Product X * Planwide overhead rate) Manufacturing cost allocated to Product Y is = (7000*52.50) Manufacturing cost allocated to Product Y is = $ 367,500/. Manufacturing cost allocated to Product Z is = (Direct labor hours consumed by Product Z * Planwide overhead rate) Manufacturing cost allocated to Product Z is - (5000*52.50) Manufacturing cost allocated to Product Z is - $ 262,500/. Expected Activity Activity Rate Determination of Activity rates :- Estimated Activity cost pool Overhead Cost Machining 228,000 Machine Setups 40,000 Production design 74,000 General factory 288,000 12,000 100 2 12,000 19.00 Per MH 400.00 Per Setup 37,000.00 Per Product 24.00 Per DLH 3) Activity rate for machining activity cost pool is $ 19.00 per machine hour 4) Activity rate for machining setup activity cost pool is $ 400.00 per setup 5) Activity rate for production design activity cost pool is $ 37,000.00 per product