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 Recommended Cost Driver Number of orders Number of production runs Pounds of materials used Estimated Cost $ 46,000 198,000 300,000 Estimated cost Oriver activity 200 orders 110 runs 140.000 pounds Activity Processing orders Setting up production Handling materials Machine depreciation and maintenance Performing quality control Packing Total estimated cost Machine-hours Number of inspections Number of units 252,000 66,000 127,500 1997,500 14,000 hours 50 Inspections 510,000 units In addition, management estimated 7,500 direct labor-hours for year 2 Assume that the following cost driver volumes occurred in January, year 2 Institutional 60, $39,00 470 Number of units produced Direct saterials costs Direct labor-hours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped 12 3 14,000 520 Standard 25,000 $27,000 410 11 2 6,000 160 2 25,000 Silver 10,000 514.000 620 5 6 2.900 20 3 10,000 60,000 Actual labor costs were $16 per hour. Required: (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 (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)