Question
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
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 ............................... 8,000 2,000
Number of setups ................... 40 160
Number of products ................ 1 1
Direct labor-hours ................... 9,000 3,000
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?
Product Y | % | Product Z | % | Total | |
Plantwide Approach | |||||
Manufacturing overhead | |||||
Activity based costing system | |||||
machinging | |||||
machine setups | |||||
product design | |||||
general factory | |||||
Total Cost Assigned To Products |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started