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![Required 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 $586,500 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 EstimatedR overhead Expected Activity Cost Poolilll Activity Measure Machining Machine setups Product design General factory CostlActivity $ 195,000 10,000 MHs Machine-hours Number ot setups7 500 Number of products 79,000 Direct labor-hours$ 245,000 12,000 DLHS 2 products Activity Measure lProduct xProduct 2 Machine-hours Number of setups Number of products 6,5003,500 100 50 5004,500 Foundational 7-9 くPrev 91011 15of 18 Next >](https://media.cheggcdn.com/media%2F6e7%2F6e75a5db-81cb-4f26-b291-755e2d6b64c9%2Fimage)
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Required 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 $586,500 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 EstimatedR overhead Expected Activity Cost Poolilll Activity Measure Machining Machine setups Product design General factory CostlActivity $ 195,000 10,000 MHs Machine-hours Number ot setups7 500 Number of products 79,000 Direct labor-hours$ 245,000 12,000 DLHS 2 products Activity Measure lProduct xProduct 2 Machine-hours Number of setups Number of products 6,5003,500 100 50 5004,500 Foundational 7-9 くPrev 91011 15of 18 Next >
Expert Answer
Before solving the questions we need find out OH (overhead ) rate per each of the activity pools. These rate are calculated by dividing the pool amount by activity frequency. For example 195000/10000 = 19.5
| Activity cost pool | Amount | Activity | OH per Act |
| Machining | 195000 | 10000 | 19.5 |
| Machine setups | 67500 | 150 | 450 |
| Product design | 79000 | 2 | 39500 |
| General factory | 245000 | 12000 | 20.4166667 |
Question – 7.9
| Total Manufacturing Overhead cost assigned to Product Y | |||
| Activity pool | Act used | OH per act | OH assigned |
| Machining | 6500 | 19.5 | 126750 |
| Machine setups | 50 | 450 | 22500 |
| Product design | 1 | 39500 | 39500 |
| General factory | 7500 | 20.416667 | 153125 |
| Total OH assigned to Product – Y | 341875 | ||
Question 7.10
| Total Manufacturing Overhead cost assigned to Product Z | |||
| Activity pool | Act used | OH per act | OH assigned |
| Machining | 3500 | 19.5 | 68250 |
| Machine setups | 100 | 450 | 45000 |
| Product design | 1 | 39500 | 39500 |
| General factory | 4500 | 20.416667 | 91875 |
| Total OH assigned to Product – Y | 244625 | ||
Question – 7.11
| Plant wide overhead recovery rate = Total OH / Total Lab Hrs | ||||
| = 586500 / 12000 = 48.875 | ||||
| % | ||||
| Product – Y | 7500 * 48.875 = 366562.5 | 62.5 | ||
| Product – Z | 4500* 48.875 = 219937.5 | 37.5 | ||
Note % are calculated as ……366562.5 / 586500 * 100 = 62.5% and 219937.5 / 586500 * 100 = 37.5 %
| 7.12 USING ABC SYSTEM | ||
| Machine cost | Amount | % |
| Product – Y | 126750 | 65 |
| Product – Z | 68250 | 35 |
| Total | 195000 | 100 |
| 7.13 Using ABC SYSTEM % of machine setup cost | |||
| Amount | % | ||
| Product – Y | 22500 | 33.33 | |
| Product – Z | 45000 | 66.67 | |
| Total | 67500 | ||
| 7.14 Using ABC SYSTEM % of product design cost | |||
| Amount | % | ||
| Product – Y | 39500 | 50 | |
| Product – Z | 39500 | 50 | |
| Total | 79000 | ||
| 7.15 Using ABC system % of general factory cost | |||
| Amount | % | ||
| Product – Y | 153125 | 62.5 | |
| Product – Z | 91875 | 37.5 | |
| Total | 245000 | ||
