College Supply Company (CSC) makes three types of drinking glosses: 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. Estimated Cost Estimated Cost Driver Units Recommended Activity Cost Driver Number of production Setting up production runs Processing orders Number of orders Handling materials Pounds of materials Using machines Machine-hours Providing quality management Number of inspections Packing and shipping Units shipped $ 32,00 52,00 14,00 70, eea 48, cea 38,@ea $ 254,00 100 runs 208 orders 7,800 pounds 10,000 hours 40 inspections 19,808 units In addition, management estimated 2,000 direct lobor-hours for year 5. Assume that the following cost driver volumes occurred in February, year 5. Short 1,080 $5,000 100 Medium 4ea $2,500 140 Tall 400 $1,500 110 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 300 680 3ea 400 800 200 2 480 1,080 388 Direct labor costs were $22 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required 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 Setting up production Processing orders Handling materials Using machines Performing quality management Packing & shipping Direct labor hour rate Allocation Rate per run per order per ib. I per hour per insp. per unit per hour
