Question

Required information 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 labour-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: Machining Machine setups Production design General factory Activity Measure Machin-hours Number of setups Number of products Direct labour-hours Estimated Overhead Cost $192,000 $ 50,400 $ 76,000 $387,200 Expected Activity 10,000 MHs 120 setups 2 products 12,000 DLHS Product Y 6,200 Product ? 3,800 Activity Measure Machine-hours Number of setups Number of products Direct labour-hours 70 10,000 2,000 Required: What is the company's plantwide overhead rate? (Round your answer to 2 decimal places.) Predetermined overhead rates 57.00 per DLH

Answer 1

Plantwide OH rate =		Estimated total OH cost / Total Direct Labor hours
	=	$ 705600 / 12000
	=	$   58.80

Workings:

Computation of Total OH cost
Machining		$ 192,000.00
Machine Setups		$   50,400.00
Production Design		$   76,000.00
General Factory		$ 387,200.00
Total OH cost		$ 705,600.00

Is this correct?