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Hickory Company manufactures two products14,000 units of Product Y and 6,000 units of Product Z....

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Accounting

Hickory Company manufactures two products14,000 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 Estimated Use Driver Machining Machine-hours $198,000 10,000 MHs Machine setups Number of setups $86,400 180 setups Production design Number of products $82,000 2 products General factory Direct labor-hours $248,000 12,000 DLHs Activity Measure Product Y Product Z Machine-hours 6,800 3,200 Number of setups 50 130 Number of products 1 1 Direct labor-hours 7,800 4,200 Calcualate the cost of a unit of product for products Y & Z using the plantwide overhead rate. Calculate the cost of a unit of product for products Y & Z using ABC Explain why the two product costs differ. How could the use of the POHR versus ABC affect the company's pricing strategy?

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