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2) Arizona Corporation manufactures two products: Product G5 and Product E4. The company uses a plantwide overhead rate based on direct labor-hours. It is
2) Arizona Corporation manufactures two products: Product G5 and Product E4. 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 G5 and E4. Activity Cost Pool Machining Machine setups Product design Order size Activity Measure Machine-hours Number of setups Number of products Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Total Cost $100,000 $ 300,000 $ 80,000 $ 350,000 Product E4 Product G5 2,000 270 3,000 230 1 1 3,000 7,000 Total Activity 5,000 MHs 500 setups 2 products 10,000 DLHS Direct labor-hours Required: a. Using the plantwide overhead rate, what amount of the total overhead cost is allocated to Product G5? b. Using the plantwide overhead rate, what amount of the total overhead cost is allocated to Product E4? c. Using the activity-based costing system, what amount of the total overhead cost is assigned to Product G5? d. Using the activity-based costing system, what amount of the total overhead cost is assigned to Product E4?
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