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. Activity Setting up production Processing orders Handling materials Using machines Providing quality management Packing and shipping Recommended Cost Driver Number of production runs Number of orders Pounds of materials Machine-hours Nunber of inspections Units shipped Estimated Cost $ 30,000 43,200 18,00 66,000 56,000 44,000 $257,200 Estimated cost Driver Units 100 runs 180 orders 9,00 pounds 11,000 hours de inspections 22,000 units In addition, management estimated 2.000 direct labor-hours for year 5. Assume that the following cost driver volumes occurred in February, year 5 Short Medium Tal Number of units produced 1,000 600 300 Direct materials costs $5,000 $2,000 $2,500 Direct labor hours 110 120 Number of orders Number of production runs 9 3 # Pounds of material 500 300 200 Machine-hours 500 300 300 Number of inspections 2 2 12 Units shipped 1,000 600 200 Direct labor costs were $18 per hour In addition, management estimated 2,000 direct labor-hours for year 5. Assume that the following cost driver volumes occurred in February. year 5. Short 1,909 $5,000 110 9 3 Tall 300 $2,500 90 Number of units produced Direct materials costs Direct labor hours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped Medium 600 $2,000 120 9 3 B00 300 2 600 300 500 2 1,000 8 200 300 12 200 Direct labor costs were $18 per hour Required: 6. Compute a predetermined overhead rate for year 5 for each cost driver recommended by the employees. Also compute a predetermined rate using direct labor hours as the allocation base, b. Compute the production costs for each product for February using direct labor hours as the allocation base and the predetermined rate computed in requiremento c. Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates computed in requiremento. (Note: Do not assume that total overhead applied to products in February 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. Activity Setting up production Processing orders Handling materials Using machines Providing quality management Packing and shipping Recommended Cost Driver Number of production runs Number of orders Pounds of materials Machine-hours Number of inspections Units shipped Estimated Cost $ 30,000 43,200 18,000 66,000 56,000 44,000 $257,200 Estimated Cost Driver Units 100 runs 180 orders 9 9,000 pounds 11,800 hours 40 inspections 22,000 units In addition, management estimated 2,000 direct labor-hours for year 5. Assume that the following cost driver volumes occurred in February, year 5. Number of units produced Direct materials costs Direct labor-hours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped Short 1,000 $5,000 110 9 3 300 500 2 1,800 Medium 600 $2,000 120 9 3 800 300 2 600 Tall 300 $2,500 90 3 8 200 300 2 200 Direct labor costs were $18 per hour
