Question

Required information [The following information applies to the questions displayed below. Hickory Company manufactures two products-15,000 units of Product Y and 7,000 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 $674,000 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 design General factory Activity Measure Cost $ 216,700 11,000 MHs $ 79,900 Machine-hours Number of setups Number of products 81,000 Direct labor-hours 170 setups 2 products 296,400 13,200 DLHs Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Product YProduct z 6,700 60 4,300 110 7,700 5,500 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 your final answers to the nearest whole dollar amount.)

Answer 1

The manufacturing overhead cost allocated to Product Y is $15,209, and the manufacturing overhead cost allocated to Product Z is $12,485.

Step-by-step explanation:

In order to determine how much manufacturing overhead cost is allocated to Product Y and Product Z, we need to calculate the allocation using the plantwide overhead rate.

First, we need to calculate the plantwide overhead rate by dividing the total manufacturing overhead cost by the total estimated direct labor-hours.

Plantwide overhead rate = Total manufacturing overhead cost / Total estimated direct labor-hours

= $674,000 / 296,400 direct labor-hours

= $2.27 per direct labor-hour

Next, we can allocate the manufacturing overhead cost to each product using the plantwide overhead rate and their respective direct labor-hours.

Manufacturing overhead cost allocated to Product Y = Plantwide overhead rate * Direct labor-hours of Product Y

= $2.27 * 6,700 direct labor-hours of Product Y

= $15,209

Manufacturing overhead cost allocated to Product Z = Plantwide overhead rate * Direct labor-hours of Product Z

= $2.27 * 5,500 direct labor-hours of Product Z

= $12,485

Therefore, Product Y is allocated $15,209 of manufacturing overhead cost, while Product Z is allocated $12,485 of manufacturing overhead cost.

Answer 2

Using the plantwide overhead rate, the manufacturing overhead cost allocated to Product Y is $394,717 and to Product Z is $281,655.

Step-by-step explanation:

To determine the amount of manufacturing overhead allocated to Product Y and Product Z using the plantwide overhead rate, we need to calculate the overhead allocation for each product separately. First, we calculate the plantwide overhead rate by dividing the total manufacturing overhead ($674,000) by the total direct labor-hours (13,200 DLHs): $674,000 / 13,200 DLHs = $51.21 per DLH. Now, to allocate the overhead to Product Y, we multiply the plantwide overhead rate by the direct labor-hours for Product Y (7,700 DLHs): $51.21 per DLH * 7,700 DLHs = $394,717. To allocate the overhead to Product Z, we multiply the plantwide overhead rate by the direct labor-hours for Product Z (5,500 DLHs): $51.21 per DLH * 5,500 DLHs = $281,655. Therefore, the manufacturing overhead cost allocated to Product Y is $394,717 and the manufacturing overhead cost allocated to Product Z is $281,655.