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	$	38,500		175	orders
Setting up production	Number of production runs		152,000		80	runs
Handling materials	Pounds of materials used		264,000		120,000	pounds
Machine depreciation and maintenance	Machine-hours		240,000		12,000	hours
Performing quality control	Number of inspections		53,600		40	inspections
Packing	Number of units		127,500		510,000	units
Total estimated cost		$	875,600

In addition, management estimated 7,700 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			28,000			7,000
Direct materials costs	$	37,000		$	27,000		$	17,000
Direct labor-hours		450			440			600
Number of orders		14			8			5
Number of production runs		4			4			6
Pounds of material		18,000			6,000			2,600
Machine-hours		610			130			100
Number of inspections		3			3			2
Units shipped		64,000			28,000			7,000

Actual labor costs were $14 per hour.

a.

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. (Round your answers to 2 decimal places.)

Activity	Rate
Processing orders		per order
Setting up production		per run
Handling materials		per pound
Using machines		per machine hour
Performing quality control		per inspection
Packing		per unit

a(2) Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. (Round your answer to 2 decimal places.)

Predetermined rate per direct labor-hour

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). (Do not round intermediate calculations.)

Account	Institutional	Standard	Silver	Total
Direct materials	$37,000	$27,000	$17,000	$81,000
Direct labor				0
Indirect costs				0
Total cost	$37,000	$27,000	$17,000	$81,000