The Foundational 15 LO71 LO73 LO74 The following information

The Foundational 15 [LO7-1, LO7-3, LO7-4] [The following information applies to the questions displayed below. 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 $791,400 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 Expected Activity Activity Cost Pool Machining Machine setups Product desigr General factory Activity Measure Machine-hours Number of setups Number of products 87,000 Direct labor-hours 379,500 12,000 DLHs Cost $ 203,000 10,000 MHs 121,900 230 setups 2 products Activity Measure Product YProduct z Machine-hours Number of setups Number of products Direct labor-hours 7,300 50 2,700 180 9,500 2,500 1. What is the company\'s plantwide overhead rate? (Round your answer to 2 decimal places.) Plantwide overhead rate per DLH 3. What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.) Activity rate per MH 5. What is the activity rate for the Product Design activity cost pool? Activity rate per product 7. Which of the four activities is a batch-level activity? Machine setups activity Machining activity General factory activity Product design activity

Solution

Ans-1 Total Overhead= Machining cost+Machine setups+ Production design +General factory overhead

203000+121900+43500+379500 = $747900

Total direct labour hours=12000

Company\'s plantwide overhead rate= Total overhead/ Total direct labour hour

$747900/12000= $62.33

Ans-3 Maching activity cost pool = Total overhead of activities/ Total vase value

$203,000/10000 MHs= $20.30

Ans=5 Product design activity cost pool= Estimated Overhead Cost/ Expected Activity

$87000/ 2 products

= $43500 per product

Ans-7 Machine setups activity

Explanation: Machine setups is a batch level activity.A setup is performed to run a batch of units. The cost of the setup is determined by the resources consumed performing the setup and it is not influenced by the number of units processed once the setup is complete.