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	$48,000	200 orders
Setting up production	Number of production runs	187,000	110 runs
Handling materials	Pounds of materials used	325,000	130,000 pounds
Machine depreciation and maintenance	Machine-hours	200,00	10,000 hours
Performing quality control	Number of inspections	58,950	45 inspections
Packing	Number of units	125,000	50,000 units
Total estimated cost		$943,950

In addition, management estimated 7,400 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		63,000			28,000			9,000
Direct materials costs	$	43,000		$	23,000		$	13,000
Direct labor-hours		480			450			570
Number of orders		11			10			7
Number of production runs		3			4			5
Pounds of material		16,000			7,000			3,200
Machine-hours		570			160			90
Number of inspections		4			2			2
Units shipped		63,000			28,000			9,000

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. (Round your answers to 2 decimal places.)

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

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 Material	$ 43,000	$ 23,000	$ 13,000	$ 79,000
Direct Labor	?	?	?
Indirect costs	?	?	?
Total Cost

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.) (Do not round intermediate calculations.)

Accounts	Institutional	Standard	Silver	Total
Direct Material	$ 43,000	$ 23,000	$13,000	$ 79,000
Direct Labor	?	?	?	?
Indirect costs
Processing orders	?	?	?	?
Setting up production	?	?	?	?
Handling material	?	?	?	?
Using machines	?	?	?	?
Performing quality control	?	?	?	?
Packing	?	?	?	?
Total cost