Question
Catalina Sails makes sails for small sailboats. It recently switched to activity-based costing from the department product costing method. The manager of Department Y, which
Catalina Sails makes sails for small sailboats. It recently switched to activity-based costing from the department product costing method. The manager of Department Y, which manufactures the sails, has identified the following cost drivers and rates for overhead:
Activity Centers Cost Drivers Rate per Cost Driver Unit
Materials handling Yards of material handled $ 0.80 per yard
Quality inspections Number of inspections $ 100 per inspection
Machine setups Number of machine setups $ 600 per setup
Running machines Number of machine-hours $ 9 per hour
Direct materials costs were $235,000 and direct labor costs were $89,000 during October, when Building S handled 43,100 yards of materials, made 900 inspections, had 110 setups, and ran the machines for 20,300 hours.
Required: 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. bal.
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
Direct Materials
Material Handlinh OH
Quality inspections OH
Machine set up OH
Running machine OH
Finished goods inventory
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