9-5

Southwest Components recently switched to activity-based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates: Rate per Cost Driver Unit Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled Number of inspections Number of machine setups Number of machine-hours $ 18 per pound S 210 per inspection $2,800 per setup $24.00 per hour Direct materials costs were $319,000 and direct labor costs were $160,000 during July, when the Fabrication Department handled 3,900 pounds of materials, made 790 inspections, had 50 setups, and ran the machines for 16,000 hours Use T-accounts to show the flow of materials, labor, and overhead costs from the four overhead activity centers through Work-in-Process Inventory and out to Finished Goods Inventory Materials Inventory Wages Payable Beg. bal Beg. ba End. bal. End. bal. Overhead Applied: Materials Handling Overhead Applied: Quality Inspections Beg. bal. Beg. bal End. bal End. bal Overhead Applied: Machine Setups Overhead Applied: Running Machines Beg. bal Beg. bal End. bal. End. bal Work in Process (WIP) Inventory Fabrication Department Finished Goods Inventory Beg. bal Beg. bal End. bal. End. bal