Foundational [LO7-1, LO7-3, LO7-4] Hickory Company manufactures two products -14

Question

Foundational [LO7-1, LO7-3, LO7-4] 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: Estimated Overhead Activity Cost PoolActivity MeasureCost Expected Activity Machining Machine setups Production design General factory Machlne-hours Number of setups Number of products Direct labor-hours $ 192,000 10,000 MHs $ 50.400 s 76.000 $ 387.200 12.000 DLHs 120 setups 2 products Product Y Product Z 6.200 3,800 70 Activity Measure Machine-hours Number of setups Number of products Direct labor-hours 50 10000 2.000

Explanation / Answer

7-12)

7-13)

7-14)

7-15)

Y Z Machining costs 6200/10000 =62% 3800/10000 = 38%

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