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College Supply Company (CSC) makes three types of drinking glasses: short, medium, and tall. It presently applies overhead using a predetermined rate based on direct
College Supply Company (CSC) makes three types of drinking glasses: short, medium, and tall. It presently applies overhead using a predetermined rate based on direct labor-hours. A group of company employees recommended that CSC switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for Year 5 for each activity center Recommended Cost Driver Estimated Cost Driver Units Estimated Cost Activity Setting up production Processing orders Handling materials Using machines Providing quality management Packing and shipping Number of production runs Number of orders Pounds of materials Machine-hours Number of inspections Units shipped $ 28,000 43,200 14,000 54,000 56,000 42,000 $237,200 100 runs 180 orders 7,000 pounds 9,000 hours 40 inspections 21,000 units In addition, management estimated 2,000 direct labor-hours for year 5
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