Question

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 Activity Measure Estimated Overhead Cost Expected Activity Machining Machine-hours $ 242,400 12,000 MHs Machine setups Number of setups $ 114,400 220 setups Production design Number of products $ 86,000 2 products General factory Direct labor-hours $ 302,400 12,000 DLHs Activity Measure Product Y Product Z Machining 8,200 3,800 Number of setups 40 180 Number of products 1 1 Direct labor-hours 8,200 3,800

What is the company’s plantwide overhead rate?

Answer 1

Answer

	Machining	$242,400
	Machine setup	$114,400
	Production design	$86,000
	General factory	$302,400
A	Total factory overheads	$745,200
B	Total direct labor hours	12,000
C = A / B	Plantwide Overhead rate	$62.10	per DLH = Answer