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Greenwood 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 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 $ 231,000 11,000 MHs
Machine setups Number of setups $ 180,000 300 setups
Production design Number of products $ 94,000 2 products
General factory Direct labor-hours $ 260,000 10,000 DLHs


Activity Measure Product Y Product Z
Machining 9,000 2,000
Number of setups 60 240
Number of products 1 1
Direct labor-hours 9,000 1,000

Sagot :

Product Y would be allocated 20% of the machine setups cost

Product Z  would be allocated 80% of the machine setups cost

What is activity-based costing?

Activity-based costing is a costing method where overhead cost of production are allocated based on the cost driver responsible for the overhead rather than using the plantwide overhead rate based on direct labor-hours.

In this case, we need to first of all determine the machine setups cost per per setups, based on the fact there 300 setups for both products Y and Z

machine setup  cost per setup=Machine setups cost/Number of setups

Machine setups cost=$180,000

Number of setups=300

machine setup  cost per setup=$180,000/300

machine setup  cost per setup=$600

Total set up cost for product Y=60*$600=$36000

Total set up cost for product Y as %=$36,000/$180,000=20%

Total set up cost for product Z=240*$600=$144,000

Total set up cost for product Z as %=$144,000/$180,000=80%

Find out more about ABC on:https://brainly.com/question/15451616

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