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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
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 $684,000 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 Activity Cost Pool Machining Activity Measure Overhead Cost Expected Activity Machine-hours $200,000 10,000 MHs Machine setups Number of setups $100,000 200 setups Product 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 Required: 1. What is the company's 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? Page 332
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