Question

Hickory 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 $586,500 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	Activity Measure	Estimated Overhead Cost		Expected Activity
Machining	Machine-hours	$	195,000	10,000	MHs
Machine setups	Number of setups	$	67,500	150	setups
Product design	Number of products	$	79,000	2	products
General factory	Direct labor-hours	$	245,000	12,000	DLHs

Activity Measure	Product Y	Product Z
Machine-hours	6,500	3,500
Number of setups	50	100
Number of products	1	1
Direct labor-hours	7,500	4,500

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

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?

a.General factory activity

b.Product design activity

c.Machine setups activity

d.Machining activity

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

a.Machining activity

b.Machine setups activity

c.General factory activity

d. Product design activity

Answer 1

162 5. What is the activity rate for the Product Design activity cost pool? 163 Amount (A) 79,000 Activity Usage (B) Activity Rate (A/B) Activity Cost driver 164 165 166 167 6. What is the activity rate for the General Factory activity cost pool? 168 Product Design 39500 Per product Number of Products 2 Amount (A) 245,000 Activity Usage (B) Activity Rate (A/ B) 12,000 Activity Cost driver 169 20.42 Per Direct Labor General Factory Direct Labor Dollars 170 171 172 7. Which of the four activities is a batch-level activity? 173 a.General factory activity 174 b.Product design activity 175 c.Machine setups activity 176 d.Machining activity 177 178 8. Which of the four activities is a product-level activity? 179 a.Machining activity 180 b.Machine setups activity 181 C.General factory activity 182 d. Product design activity