Question
Hickory Company manufactures two products14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct
Hickory Company manufactures two products14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labour-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 Measure | Estimated Overhead Cost | Expected Activity |
Machining | Machine-hours | $200,000 | 10,000 MH |
Machine setups | Number of setups | $100,000 | 200 setups |
Product design | Number of products | $ 84,000 | 2 products |
General factory | Direct labour-hours | $300,000 | 12,000 DLHs |
| Product Y | Product Z |
Machine-hours | 7,000 | 3,000 |
Number of setups | 50 | 150 |
Number of products | 1 | 1 |
Direct labour-hours | 8,000 | 4,000 |
Required:
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What is the companys plantwide overhead rate?
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Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y? How much is allocated to Product Z?
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What is the activity rate for the Machining activity cost pool?
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What is the activity rate for the Machine Setups activity cost pool?
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What is the activity rate for the Product Design activity cost pool?
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What is the activity rate for the General Factory activity cost pool?
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Which of the four activities is a batch-level activity? Why?
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Which of the four activities is a product-level activity? Why?
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Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y?
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Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z?
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