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Greenwood 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 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 $ 200,000 10,000 MHs Machine setups Number of setups $ 100,000 200 setups Production design Number of products $ 84,000 2 products General factory Direct labor-hours $ 300,000 12,000 DLHs Activity Measure Product Y Product Z Machining 8,000 2,000 Number of setups 40 160 Number of products 1 1 Direct labor-hours 9,000 3,000 1.value: 0.33 pointsRequired information Required: 1. What is the company’s plantwide overhead rate?

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Answer:

Predetermined manufacturing overhead rate= $57 per direct labor hour

Explanation:

First, we need to calculate the total estimated overhead:

Total estimated overhead= 200,000 + 100,000 + 84,000 + 300,000

Total estimated overhead= $684,000

Total direct labor hours= 9,000 + 3,000= 12,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 684,000/12,000

Predetermined manufacturing overhead rate= $57 per direct labor hour