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

$

192,000   

10,000

MHs

  Machine setups

Number of setups

$

50,400   

120

setups

  Production design

Number of products

$

76,000   

2

products

  General factory

Direct labor-hours

$

387,200   

16,000

DLHs

  

Activity Measure

Product Y

Product Z

  Machining

6,200

3,800

  Number of setups

50

70

  Number of products

1

1

  Direct labor-hours

7,200

8,800

1.

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.)

3.

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

4.

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

5.

What is the activity rate for the Product Design activity cost pool? (Round your answer to 2 decimal places.)

6.

What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.)

7.

Which of the four activities is a batch-level activity?

Machining activity

General factory activity

Product design activity

Machine setups activity

8.

Which of the four activities is a product-level activity?

Machine setups activity

Machining activity

General factory activity

Product design activity

9.

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

10.

Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

11.

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.)

12.

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.)

13.

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.)

        

14.

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.)

       

15.

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.)

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:

Solution

Answer 1 Plantwide overhead rate = Estimated Overhead cost / Estimated direct labour hours Plantwide overhead rate = [$192000+$50400+$76000+$387200]/16000 DLHs = $44.10 per direct labour hour Answer 2 Allocation of Manufacturing overheads to products Manufacturing overheads allocated to Product Y = 7200 Direct labour hours * $44.10 = $3,17,520 Manufacturing overheads allocated to Product Z = 8800 Direct labour hours * $44.10 = $3,88,080 Answer 3 Activity rate for the Machining activity cost pool = Estimated overhead cost / Total machine hours = $192000 / 10000 machine hours = $19.20 per machine hour Answer 4 Activity rate for the Machine Setups activity cost pool = Estimated overhead cost / Total no.of setups = $50,400/120 setups = $420 per setup Answer 5 Activity rate for the Product Design activity cost pool = Estimated overhead cost / No.of products = $76000/2 = $38000 per product Answer 6 Activity rate for the General Factory activity cost pool = Estimated Overhead cost / Total direct labour hours = $387200 / 16000 DLHs = $24.20 per direct labour hour Answer 7 Batch level activities - Machining activity,General factory activity,Machine setups activity Answer 8 Product level activities - Product design activity Answer 9 Manufacturing overhead cost assigned to Product Y using ABC system Cost allocated to Product Y Machining (6200 Machine hours *$19.20) $119,040 Machine setup (50 setups * $420) $21,000 Production Design (1 product * $38000) $38,000 General Factory (7200 DLHs * $24.20) $174,240 Manufacturing cost assigned to Product Y $352,280 Answer 10 Manufacturing overhead cost assigned to Product Z using ABC system Cost allocated to Product Z Machining (3800 Machine hours *$19.20) $72,960 Machine setup (70 setups * $420) $29,400 Production Design (1 product * $38000) $38,000 General Factory (8800 DLHs * $24.20) $212,960 Manufacturing cost assigned to Product Y $353,320 Answer 11 Percentage of cost allocated to Product Y using plantwide overhead rate = $317520 / $705600 = 45% Percentage of cost allocated to Product Z using plantwide overhead rate = $388080 / $705600 = 55% Answer 12 to 15 Product Y Product Z Machining cost allocation % 62.00% 38.00% Machine Setup cost allocation % 41.67% 58.33% Production design cost allocation % 50.00% 50.00% General Factory cost allocation % 45.00% 55.00%