Greenwood Company manufactures two products-13,000 units of Product Y and 5,000

Question

Greenwood Company manufactures two products-13,000 units of Product Y and 5,000 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 of its manufacturing overhead to four cost pools. The following edditional information is available for the company as a whole and for Products Y end Z Estimated Overhead Activity Cost Pool Machining Machine setups Production design General factory Cost Expected Activity 231,600 2,000 MHs Activity Measure Number of setups $55,900 130 setups 77000 2 products Number of products Direct labor-hours $364,500 5,000 DLHs Activity Measure Product Y Product Z 5,700 90 Machining Number of setups Number of product:s Direct labor-hours 6,3005 40 7,300 7,700

Explanation / Answer

Traditional costing Total manufacturing cost 729000 Total direct labor hours 15000 Predetermined OH rate 48.60 Product Y Product Z Direct labor hours 7300 7700 Predetermined OH rate 48.60 48.60 Overhead cost applied 354780 374220 729000 11 % of cost 48.67% 51.33% ABC Total cost Total cost driver Cost per driver Machining 231600 12000 19.3 Machine setups   55900 130 430.00 Production design 77000 2 38500.00 General factory 364500 15000 24.30 Total overhead cost 729000 Product Y Cost per driver Product Z Machining 121590 19.3 110010 231600 12 % of cost 52.50% 47.50% Machine setups   17200 430.00 38700 55900 13 % of cost 30.77% 69.23% Production design 38500 38500.00 38500 77000 14 % of cost 50.00% 50.00% General factory 177390 24.30 187110 364500 15 % of cost 48.67% 51.33% Total cost 233091 264311 497402 % of cost 46.86% 53.14%

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