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.
REQUIN al i'll Compute & predetermined overhead rate for year ? for Each cost driver using the Estimated costs and Estimated cost driver units prepared by the consultant . I Found your answers to 2 decimal Place S . !` Activity Plate Processing orders per order Setting up production ger run Handling materials per pound Using machine =\\ per machine hour* Performing quality control per inspection* Facking \\per unit 12 ) Compute a predetermined rate for Year 2 using direct Istar- hours as the allocation bazz . ( Round your* answer to 2 decimal places _ !` Predetermined rate per direct labor-hour |` Compute the production costs for each product for January using direct labor-hours as the alocation base and the predetermined rate computed in requirement [Ell = !. ( Found " Indirect costs" to the nearest dollar . ! Account Institutional Standard Silver Total Direct materials* 3 7 . 00 0 | {\\ \\25, 00 0 | } TE, OOD Direct labor Indirect costs Total cost |0 ) Compute the production costs for Each product for January wzing the Fast driverE recommended by the Consultant and the predetermined rates computed in requirement ( =] . I Hate : DID not SISSUITE that tate overhead applied to products in January' will be the Fame for activity - kissEd casting ZE it was for the* labor- hour - based allocation . !` Account Institutional Standard Silver Total Direct materials 37. 000 |{\\ 25. 000 |{\\ 1 7 . DOO |{\\ TO. OOD Direct Isbor* Indirect costs Processing anders Setting up production Handling materials* LIzing machines* Ferforming quality control Packing Total costthchen Supply, Inc. (KSI), manufactures three types of atware: 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 activitybased costing system and prepared the following cost estimates for year 2 for the recommended cost drivers. Activity Processing orders Setting up production Handling materials Machine depreciation and maintenance Performing quality control Packing Total estimated cost Recommended Estimated Cost Driver Cost Number of orders 5 50,625 Number of production runs 153,000 Pounds of materials used 275,000 Machinehours 250,000 Number of inspections 56,2 50 Number of units 102,000 $896,375 In addition, management estimated 3,000 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January year 2: Number of units produced Direct materials costs Direct laborhours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped Institutional Standard Silver 64,000 23,000 10,000 5 37,000 $25,000 $1 1000 410 4-00 560 10 10 B 3 2 6 13,000 6,000 3,500 530 140 ?0 4 3 3 64,000 23,000 10,000 Actual labor costs were $14 per hour. Estimated Cost Driver Activity 225 orders 90 nins 110,000 pounds 13,000 hours 45 inspections 510,000 units
