Exercise 9-42 Activity-Based Costing: Cost Flows through T-Accounts (LO 9-5, 7)

Southwest Components recently switched to activity-based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates:

Activity Centers	Cost Drivers	Rate per Cost Driver Unit
Materials handling	Pounds of material handled	$	36	per pound
Quality inspections	Number of inspections	$	450	per inspection
Machine setups	Number of machine setups	$	5,400	per setup
Running machines	Number of machine-hours	$	45	per hour

Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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. b. al End. bal. End. bal Overhead Applied: Materials Handling Overhead Applied: Quality Inspections Beg. bal Beg. bal End. ba End. bal