Question

Required information Greenwood Company manufactures two products—14,000 units of Product Y and 6,000 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 $ 192,000 $ 50,400 $ 76,000 $ 387,200 Expected Activity 10,000 MHS 120 setups 2 products 16,000 DLHs Activity Measure Machining Number of setups Number of products Direct labor-hours Product Y 7,200 50 Product Z 2,800 70 7,200 8,800 13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.) Product Product Z Machine setups cost

Answer 1

Machine Setup:

Overhead rate per setup = Estimated overhead cost / Estimated activity
Overhead rate per setup = $50,400 / 120
Overhead rate per setup = $420

Product Y:

Machine setups cost assigned = Overhead rate per setup * Estimated activity
Machine setups cost assigned = $420 * 50
Machine setups cost assigned = $21,000

Percentage of machine setups cost = Machine setups cost assigned / Estimated machine setups cost
Percentage of machine setups cost = $21,000 / $50,400
Percentage of machine setups cost = 0.4167 or 41.67%

Product Z:

Machine setups cost assigned = Overhead rate per setup * Estimated activity
Machine setups cost assigned = $420 * 70
Machine setups cost assigned = $29,400

Percentage of machine setups cost = Machine setups cost assigned / Estimated machine setups cost
Percentage of machine setups cost = $29,400 / $50,400
Percentage of machine setups cost = 0.5833 or 58.33%