1. What is the company’s plantwide overhead rate per DLH? 2. Using the plantwide

Question

1. What is the company’s plantwide overhead rate per DLH?

2. Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z?

3. What is the activity rate for the Machining activity cost pool?

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?

6. What is the activity rate for the General Factory activity cost pool?

7. n/a

8. n/a

9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y?

10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z?

11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z?

12. Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z?

13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z?

14. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z?

15. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z?

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 $705,600 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 Expected Activity Activity Cost Pool Machining Machine setups Product design General factory Activity Measu Machine-hours Number of setups Number of products Direct labor-hours re Cost $ 192,000 10,000 MHs $ 50,400 76,000 120 setups 2 products 387,200 12,000 DLHs Activity Measure Product YProduct z Machine-hours Number of setups Number of products Direct labor-hours 3,800 70 1 2,000 6,200 50 10,000

Explanation / Answer

1. Company’s plantwide overhead rate per DLH

2. Manufacturing overhead cost allocated to Product Y and Product Z is as shown below:

3. Activity rate for the Machining activity cost pool is 192,000/10,000 = $19.2 per machine hour

4. Activity rate for the Machine Setups activity cost pool 50,400/120 = $420 per setup

Total Overhead 705,600 Total direct labor hours 12,000 Plantwide overhead rate (705,600/12,000) 58.80

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