Greenwood Company manufactures two products—14,000 units of Product Y and 6,000
ID: 2562923 • Letter: G
Question
Greenwood 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:
1. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your answers to 2 decimal places.) Total overhead cost Product Y____% Product Z_____%
2. Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)
Machining Cost Product Y___% Product Z___%
3. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)
Machine setups cost Product Y____%
Product Z____%
4. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)
Product design cost Product Y____%
Product Z____%
5. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.) General factory cost Product Y____% Product Z_____%
Greenwood 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:
Explanation / Answer
Activity Total cost Annual cost drivers Cost per driver Machining 206000 10000 Machine hours 20.6 per machine hour Machine setups 145600 260 setups 560 Per setup Production design 90000 2 products 45000 per product General factory overhads 307200 12000 DLHS 25.6 Per DLH Total Overheads 748,800 Total overheads $ 748,800 Direct labour hours 12000 hours Pre dettermined Plantwide overhead rate = total overheads/ total labour hours (748,800/12,000) = $ 62.40 per labour hour Allocation of Cost Product Y Product Z TOTAL Number of units 14000 6000 20000 Direct labour hours 8600 3400 12000 Machining in MH 7600 2400 10000 Number of setups 50 210 260 Number of product 1 1 2 ReQ1 Overhead based on Plantwide@62.40 Overhead alocated 536640 212160 748800 Percentage of cost Allocated to Product 71.67% 28.33% 100% Req 2: Allocation of machining cost@20.60 per machine hour Maching cost allocated 156560 49440 206000 Percentage to product 76.00% 24.00% 100.00% Req 3: Allocation of machining setup cost@560 per setup Machine setup cost 28000 117600 145600 Percentage to product 19.23% 80.77% 100.00% Req 4: Allocation of Product design cost@45,000 per product Product design cost 45000 45000 90000 Percentage to product 50.00% 50.00% 100.00% Req 5: Allocation of General factory overhead@25.60 per DLH General factory overhead 220160 87040 307200 Percentage to product 71.67% 28.33% 100.00%
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