Hickory Company manufactures two

products14,000 units of Product Y and 6,000

units of Product Z. The company uses a plant wide 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

Machining ............................... 7,000 3,000

Number of setups ................... 50 1 50

Number of products ................ 1 1

Direct labor-hours ................... 8,000 4,000

QUESTIONS:

1. What is the companys plantwide overhead

rate?

2. Using the plantwide overhead rate, how much manufacturing

overhead cost is allocated to Product Y? How much is allocated to

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. Which of the four activities is a batch-level activity?

Why?

8. Which of the four activities is a product-level activity?

Why?

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?

What percentage is allocated to Product Z?

12. Using the ABC system, what percentage of the Machining costs

is assigned to Product Y? What percentage is assigned to Product Z?

Are these percentages similar to those obtained in question 11?

Why?

13. Using the ABC system, what percentage of Machine Setups cost

is assigned to Product Y?

What percentage is assigned to Product Z? Are these percentages

similar to those obtained in question 11? Why?

14. Using the ABC system, what percentage of the Product Design

cost is assigned to Product Y? What percentage is assigned to

Product Z? Are these percentages similar to those obtained in

question 11? Why?

15. Using the ABC system, what percentage of the General Factory

cost is assigned to Product Y? What percentage is assigned to

Product Z? Are these percentages similar to those obtained in

question 1 ? Why?