9 20 points eBook Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver. It applies all indirect costs according to a predetermined rate based on direct labor-hours. A consultant recently suggested that the company switch to an activity-based costing system and prepared the following cost estimates for year 2 for the recommended cost drivers. Activity Processing orders Setting up production Handling materials Machine depreciation and maintenance Performing quality control Packing Total estimated cost Print Recommended Cost Driver Number of orders Number of production runs Pounds of materials used Machine-hours Number of inspections Number of units Estimated Cost Driver Activity 200 orders 80 runs 130,000 pounds Estimated Cost $ 44,000 136,000 286,000 209,000 11,000 hours 58,950 117,500 $851,450 45 inspections 470,000 units References In addition, management estimated 7,700 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January, year 2. Institutional Number of units produced 56,000 Direct materials costs $38,000 Standard 22,000 $25,000 Silver 9,000 $12,000 Direct labor-hours 480 410 610 Number of orders 12 10 6 Number of production runs 2 2 7 Pounds of material 17,000 5,000 2,800 Machine-hours Number of inspections 560 2 120 3 80 3 Units shipped 56,000 22,000 9,000 Actual labor costs were $15 per hour. Required: a. (1) Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units prepared by the consultant. (2) Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. b. Compute the production costs for each product for January using direct labor-hours as the allocation base and the predetermined rate computed in requirement a(2). c. Compute the production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirement a. (Note: Do not assume that total overhead applied to products in January will be the same for activity-based costing as it was for the labor-hour-based allocation.) Complete this question by entering your answers in the tabs below. Req A1 Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units prepared by the consultant. (Round your answers to 2 decimal places.) Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing Rate per order per run per pound per machine hour per inspection per unit Req A2 Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. (Round your answer to 2 decimal places.) Predetermined rate per direct labor-hour Req B Compute the production costs for each product for January using direct labor-hours as the allocation base and the predetermined rate computed in requirement a(2). (Do not round intermediate calculations.) Account Direct materials Institutional Standard Silver Total $ 38,000 $ 25,000 $ 12,000 $ 75,000 Direct labor Indirect costs Total cost Req C Compute the production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirement a. (Note: Do not assume that total overhead applied to products in January will be the same for activity-based costing as it was for the labor-hour-based allocation.) (Do not round intermediate calculations.) Account Institutional Standard Silver Total Direct materials $ 38,000 $ 25,000 $ 12,000 $ 75,000 Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost Show less