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	Recommended Cost Driver	Estimated Cost			Estimated Cost Driver Units
Setting up production	Number of production runs	$	22,400		80	runs
Processing orders	Number of orders		52,000		200	orders
Handling materials	Pounds of materials		18,000		9,000	pounds
Using machines	Machine-hours		63,000		9,000	hours
Providing quality management	Number of inspections		48,000		40	inspections
Packing and shipping	Units shipped		42,000		21,000	units
		$	245,400

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			Tall
Number of units produced		1,200			500			500
Direct materials costs	$	4,000		$	3,000		$	1,500
Direct labor-hours		110			130			110
Number of orders		7			7			5
Number of production runs		1			4			9
Pounds of material		500			800			300
Machine-hours		400			300			300
Number of inspections		2			1			2
Units shipped		1,200			500			400

Direct labor costs were $20 per hour.

Required:

a. 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 requirement a. c. Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates computed in requirement a. (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.)

A. 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. (Round your answers to 2 decimal places.)

Activity	Allocation Rate
Setting up production		per run
Processing orders		per order
Handling materials		per lb.
Using machines		per hour
Performing quality management		per insp.
Packing & shipping		per unit
Direct labor hour rate		per hour

B. Compute the production costs for each product for February using direct labor-hours as the allocation base and the predetermined rate computed in requirement a. (Do not round intermediate calculations.)

	Short	Medium	Tall
Direct materials	$4,000	$3,000	$1,500
Direct labor
Overhead
Total costs

C. Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates computed in requirement a. (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.) (Do not round intermediate calculations.)

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	Short	Medium	Tall
Direct materials	$4,000	$3,000	$1,500
Direct labor
Setting up production
Processing orders
Handling materials
Using machines
Performing quality management
Shipping
Total costs