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. Estimated Cost Recommended Cost Driver Number of orders Number of production runs Pounds of materials used $ 49,000 198,000 264,000 Estimated Cost Driver Activity 200 orders 110 runs 120,000 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 240,000 64,000 117,500 $932,500 12,000 hours 50 inspections 470,000 units In addition, management estimated 7,400 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 labor-hours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped Institutional 62,000 $37,000 430 14 3 15,000 600 4 62,000 Standard 24,000 $23,000 490 10 2 7,000 140 4 24,000 Silver 8,000 $12,000 550 5 7 3,400 60 4 8,000 Actual labor costs were $14 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.) Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Reqc Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs ar 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 Vily Sumy as TON Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Reqc Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. (Round your answer to 2 places.) Predetermined rate per direct labor-hour Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Reqc Compute the production costs for each product for January using direct labor-hours as the allocation base and predetermined rate computed in requirement a(2). (Do not round intermediate calculations.) Silver Total Institutional Standard $ 37,000 $ 23,000 $ 12,000 $ 72,000 Account Direct materials Direct labor Indirect costs Total cost Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B Reqc 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.) (Do not round intermediate calculations.) Show less Account Silver Total Institutional Standard $ 37,000 $ 23,000 Direct materials $ 12,000 $ 72,000 Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost
