Greenwood Company manufactures two products-14,000 units of Product Y and 6,000

Question

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: Estimated Overhead Cost $ 200,000 100,000 $ 84,000 Expected Activity Activity Cost Pool Machining Machine setups Production desiqn General factory Activity Measure Machine-hours Number of setups Number of products Direct labor-hours 300,000 12,000 DLHs 10,000 MHs 200 setups 2 products Activity Measure Machining Number of setups Number of products Direct labor-hours Product Y 8,000 Product z 2,000 160 1 3,000 40 9,000

Explanation / Answer

3) Machining activity rate = 200000/10000 = 20 per machine hour

4)Machine setup activity rate = 100000/200 = 500 per setup

5) Product design = 84000/2 = 42000 per product

6) general factory = 300000/12000 = 25 per labour hour

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