Hickory Company manufactures two products—14,000 units of Product Y and 6,000 un

Question

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 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:

  

  

Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity   Machining Machine-hours $ 209,000    10,000 MHs   Machine setups Number of setups $ 171,100    290 setups   Production design Number of products $ 93,000    2 products   General factory Direct labor-hours $ 259,000    12,000 DLHs

Explanation / Answer

1)Plantwide overhead rate = estimated overhead /estimated direct labor hours

                                              = (209000 + 171100 +93000 + 259000) /12000

                                              = 732100 /12000

                                              = $ 61.01 per DLH

2)Prodcut Y = 8900 * 61.01 = $ 542989

Product Z= 3100 * 61.01 =$ 189131.

3) Activity rate = 209000/ 10000 =$ 20.90 per MH

4) Activity rate = 171100 /290 =$ 590 per set up

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