Question

Greenwood Company manufactures two products—13,000 units of Product Y and 5,000 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 $ 228,000 12,000 MHs
Machine setups Number of setups $ 40,000 100 setups
Production design Number of products $ 74,000 2 products
General factory Direct labor-hours $ 288,000 12,000 DLHs
Activity Measure Product Y Product Z
Machining 7,000 5,000
Number of setups 40 60
Number of products 1 1
Direct labor-hours 7,000 5,000
Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

Answer:

Product Y 58%

Product Z 42%

Explanation:

Calculation for the percentage of the General Factory cost is assigned to Product Y and Product Z

First step is to find the General factory activity rate

General factory activity rate =$ 288,000/12,000DLHs

General factory activity rate= 24.00

Second step is to Compute Overhead allocation: for Product Y and Product Z

Overhead

Product Y(7,000*24.00) 168,000

Product Z(5,000*24) 120,000

Total 288,000

Last step is to Compute the percentage of the General Factory cost is assigned to Product Y and Product Z

Overhead Percentage of total

Product Y 168,000/288,000

Product Y=0.58*100

Product Y =58%

Product Z 120,000/288,000

Product Z=0.42*100

Product Z=42%

Therefore the percentage of the General Factory cost assigned to Product Y is 58% and Product Z is 42%