Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver. It applies all indirect costs according to a predetermined rate based on direct labor-hours. A consultant recently suggested that the company switch to an activity-based costing system and prepared the following cost estimates for year 2 for the recommended cost drivers.

Activity	Recommended Cost Driver	Estimated Cost			Estimated Cost Driver Activity
Processing orders	Number of orders	$	47,000		200	orders
Setting up production	Number of production runs		187,000		110	runs
Handling materials	Pounds of materials used		250,000		100,000	pounds
Machine depreciation and maintenance	Machine-hours		231,000		11,000	hours
Performing quality control	Number of inspections		69,500		50	inspections
Packing	Number of units		130,000		520,000	units
Total estimated cost		$	914,500

In addition, management estimated 7,200 direct labor-hours for year 2.

Assume that the following cost driver volumes occurred in January, year 2.

	Institutional			Standard			Silver
Number of units produced		56,000			24,000			9,000
Direct materials costs	$	39,000		$	20,000		$	14,000
Direct labor-hours		460			430			560
Number of orders		12			10			5
Number of production runs		4			3			6
Pounds of material		17,000			6,000			2,900
Machine-hours		610			150			60
Number of inspections		3			3			4
Units shipped		56,000			24,000			9,000

Actual labor costs were $15 per hour.

Required:

a.

(1) Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units prepared by the consultant. (2) Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. b. Compute the production costs for each product for January using direct labor-hours as the allocation base and the predetermined rate computed in requirement a(2). c. Compute the production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirement a. (Note: Do not assume that total overhead applied to products in January will be the same for activity-based costing as it was for the labor-hour-based allocation.)

Req A1 Req A2 Req B Reqc Compute a predetermined overhead rate for year 2 for each cost driver using units prepared by the consultant. (Round your answers to 2 decimal places.) Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing Rate per order per run per pound per machine hour per inspection per unit Req A1 Req A2 Req B Reqc ---- Compute a predetermined rate for year 2 using direct labor-hours places.) Predetermined rate per direct labor-hour