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 $ 43,000 171,000 336,000 Estimated cost Driver Activity 200 orders 90 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 234,000 60,300 130,000 $974,300 13,000 hours 45 inspections 520,000 units In addition, management estimated 7,900 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 58,000 23,000 8,000 Direct materials costs $36,000 $22,000 $13,000 Direct labor-hours 550 Number of orders 12 11 5 Number of production runs 3 Pounds of material 13,000 6,000 2,500 Machine-hours 590 Number of inspections 3 Units shipped 58,000 23,000 8,000 470 440 3 6 130 60 3 3 Actual labor costs were $15 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.)