Answer:
1) Plant-wide overhead rate = Total estimated overhead ÷ Direct labor hours
= $728,900 ÷ 10,000
= $73 per DLH
2) Product Y
manufacturing overhead cost = $73 × 8,700 = $635,100
Product Z
manufacturing overhead cost = $73 × 1300 = $94,900
3) Machining ⇒ $227,000 ÷ 11,000 = $21 per MH
<h2>
Explanation:</h2>
<u>Using ABC</u>
Step 1: Identify cost activities and their cost drivers
- Machining ⇒ Machine hours
- Machine Setups ⇒ No. of setups
- Production design ⇒ No. of products
- General factory ⇒ Direct Labor hours
Step 2: Assign overhead costs to activities identified
- Machining ⇒ $227,000
- Machine Setups ⇒ $153,900
- Production design ⇒ $91,000
- General factory ⇒ $257,000
<em>Sum</em> = <em>$728,900</em>
Step 3: Calculate Total Estimated Cost Driver Activity
Machining ⇒ 11,000 MHs
- Machine Setups ⇒ 270 setups
- Production design ⇒ 2 products
- General factory ⇒ 10,000 DLHs
Step 4: Calculate overhead rates
- Machining ⇒ $227,000 ÷ 11,000 = $21 per MH
- Machine Setups ⇒ $153,900 ÷ 270 = $570 per setup
- Production design ⇒ $91,000 ÷ 2 = $45,500 per product
- General factory ⇒ $257,000 ÷ 10,000 = $26 per DLH
Step 5: Apply overheads to product
Product Y
- Machining ⇒ 8,700 × $21 per MH =$182,700
- Machine Setups ⇒ 60 × $570 per setup = $34,200
- Production design ⇒ 1 × $45,500 per product = $45,500
- General factory ⇒ 8,700 × $26 per DLH = $226,200
<em>Sum</em> = <em>$488,600</em>
Product Z
- Machining ⇒ 2,300 × $21 per MH =$48,300
- Machine Setups ⇒ 210 × $570 per setup = $119,700
- Production design ⇒ 1 × $45,500 per product = $45,500
- General factory ⇒ 1300 × $26 per DLH = $33,800
<em>Sum</em> = <em>$243,700</em>
<em></em>
<u>Using Plant-wide overhead </u>
Plant-wide overhead rate = Total estimated overhead ÷ Direct labor hours
= $728,900 ÷ 10,000
= $73 per DLH
Product Y
manufacturing overhead cost = $73 × 8,700 = $635,100
Product Z
manufacturing overhead cost = $73 × 1300 = $94,900
