Greenwood Company manufactures two products14000 units of Pr

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:

Activity Cost Pool          Activity Measure Estimated          Overhead Cost         Expected Activity

Machining                           Machine-hours                           $ 203,000                   10,000 MHs

Machine setups                 Number of setups                       $ 121,900                     230 setups

Production design             Number of products                     $ 87,000                      2 products

General factory                Direct labor-hours                         $ 379,500                     15,000 DLHs

Activity Measure       Product Y          Product Z

Machining                  7,300                 2,700

Number of setups          50                  180

Number of products         1                   1

Direct labor-hours        9,500              5,500

)What is the company’s plantwide overhead rate? (Round your answer to 2 decimal places.)

2.) 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.)

Manfacturing Product Y?    Product Z?

3.) What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)                          Per MH?

4.) What is the activity rate for the Machine Setups activity cost pool? (Round your answer to 2 decimal places.)   Per setup?

Solution

1. Plantwide overhead rate = Total overhead expense / Direct labour hour

                                           = 791400 / (9500+5500)

                                          = 52.76 $ per hour

2. Allocation of manufacturing overhead to product Y and Z

3 Calculation of activity rate -

.

Activity rate for the Machining activity cost pool = 20.3 $ per machine hour

4. Activity rate for the Machine Setups activity cost pool = 530 $ per setup

    This information are taken from table calculated in part 3.

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Note - Answer is made specific to the question. Allocation of Overhead to the product Y & Z using Activity based costing is not performed because it was not asked in any of the part