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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 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 $ 200,000 10,000 MHs
Machine setups Number of setups $ 100,000 200 setups
Production design Number of products $84,000 2 products
General factory Direct labor-hours $ 300,000 12,000 DLHs
Activity Measure Product Y Product Z
Machine-hours 7,000 3,000
Number of setups 50 150
Number of products 1 1
Direct labor-hours 8,000 4,000
1. What is the activity rate for the Product Design activity cost pool?
2. What is the activity rate for the General Factory activity cost pool?
3. Which of the four activities is a batch-level activity?
4. Which of the four activities is a product-level activity?
5.Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Do not round intermediate calculations.)
6. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Do not round intermediate calculations.)
7. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))
8. Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z?
9. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z?
10. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z?
11. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Respuesta :

Zviko

Answer:

1. $42,000 per product

2. $25,000 per DLH

3. Machine setups

4. Production design

5. $407,000

6. $277,000

7. $456,000

8. $228,000

9. Product Y = 25 % and Product Z = 75 %

10.Product Y = 50 % and Product Z = 50 %

11. Product Y = 66.7 % and Product Z = 33.3 %

Explanation:

Activity Rate = Estimated Overhead Cost ÷ Expected Activity

therefore,

Machining activity = $ 200,000 ÷ 10,000 = $20 per MH

Machine activity = $ 100,000 ÷ 200 = $500 per set up

Product Design activity = $84,000 ÷ 2 = $42,000 per product

General Factory activity = $300,000 ÷ 12,000 = $25,000 per DLH

Overhead Calculation using ABC system

Product Y

Machining activity  ($20 x 7,000)          =       $140,000

Machine activity  ($500 x 50)                =        $25,000

Product Design activity  ($42,000 x 1)   =       $42,000

General Factory activity  ($25 x 8,000) =     $200,000

Total Overhead                                        =     $407,000

Product Z

Machining activity  ($20 x 3,000)          =      $60,000

Machine activity  ($500 x 150)               =      $75,000

Product Design activity  ($42,000 x 1)   =     $42,000

General Factory activity  ($25 x 4,000) =    $100,000

Total Overhead                                        =   $277,000

Overhead Calculation using Plant Wide Overhead Rate

Plantwide overhead rate = Total Overhead Cost ÷ Total Direct Labor hours

where,

Total Overhead Cost = $200,000 + $100,000 + $84,000 + $ 300,000

                                   = $684,000

Total Direct Labor hours = 8,000 + 4,000 = 12,000

therefore,

Plantwide overhead rate = $684,000 ÷ 12,000 = $57 per DLH

therefore,

Product Y = $57 x 8,000 =  $456,000

Product Z = $57 x 4,000 =  $228,000

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