Hickory Company manufactures two products15,000 units of Product Y and 7,000 units of Product Z. The company
Question:
Hickory Company manufactures two products15,000 units of Product Y and 7,000 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 $674,000 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:
Activity Cost PoolActivity MeasureEstimated Overhead CostExpected ActivityMachiningMachine-hours$216,70011,000MHsMachine setupsNumber of setups$79,900170setupsProduct designNumber of products$81,0002productsGeneral factoryDirect labor-hours$296,40013,200DLHs
Activity MeasureProduct YProduct ZMachine-hours6,7004,300Number of setups 60110 Number of products11Direct labor-hours7,7005,500
Introduction to Managerial Accounting
ISBN: 978-0078025792
7th edition
Authors: Peter Brewer, Ray Garrison, Eric Noreen