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 $ 40,250 144,000 360,000 Metivity Processing orders Setting up production Handling materiala Machine depreciation and maintenance Performing quality control Packing Total estimated cost Estimated cost Driver Activity 175 orders 90 runs 120,000 pounds Machine-hours Number of inspections Number of units 220,000 67,500 110,000 $941,750 11,000 hours 50 inspections 440,000 units In addition, management estimated 7100 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 64,000 20,000 Direct materials costs 9,000 $42,000 $23,000 $14,000 Direct labor-hours 410 480 640 Number of orders 13 6 Number of production runs 2 3 Pounds of material 13,000 7.000 3,300 Machine hours 570 120 100 Number of inspections 2 Units shipped 64,000 20,000 9.000 6 3 3 Actual labor costs were $16 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). ent #8 - Chapter 9 Saved AM Actual labor costs were $16 per hour, a. 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 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.) Complete this question by entering your answers in the tabs below. Req A1 Req A2 Red B Reqc 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. (Round your answers to 2 decimal places.) Rate per order perrun Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing per pound per machine hour per inspection per unit ReqA2 >
