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 Estimated Cost Recommended Driver Activity 200 orders Activity Processing orders Setting up production Cost Driver Cost Number of orders $ 47,000 Number of 180,000 90 runs production runs Pounds of materials used Handling mat eri als 325,000 130,000 pounds Machine depreciation and maintenance Performing quality Number of control Machine-hours 12,000 hours 252,000 45 inspections 57,150 inspections Packing Total estimated 147,000 490,000 units Number of units $1,008,150 cost In addition, management estimated 7,500 direct labor-hours for year 2 Assume that the following cost driver volumes occurred in January, year 2 Institutional Standard Silver Number of units 61,000 25,000 9,000 produced Direct materials $21,000 $37,000 $15,000 Costs Direct labor- 610 450 470 hours Number of orders 10 7 5 Number of 3 2 5 production runs Pounds of 17,000 5,000 2,900 material Machine-hours 590 140 100 Number of 3 4 4 inspections Units shipped 61,000 25,000 9,000 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.) Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Req C 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 Processing orders Setting up production Handling materials Rate per order per run per pound per machine hour Using machines Performing quality control Packing per inspection per unit Req A1 Req A2 Req B Req C 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 Req A1 Req A2 Req B Req C 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 Total Standard Silver $ $ $ $ Direct materials 37,000 21,000 15,000 73,000 Direct labor Indirect costs Total cost Req A1 Req A2 Req B Req 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.) Show lessA Standard Account Institutional Silver Total $ $ 21,000 $ $ 37,000 Direct materials 15,000 73,000 Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost 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 Estimated Cost Recommended Driver Activity 200 orders Activity Processing orders Setting up production Cost Driver Cost Number of orders $ 47,000 Number of 180,000 90 runs production runs Pounds of materials used Handling mat eri als 325,000 130,000 pounds Machine depreciation and maintenance Performing quality Number of control Machine-hours 12,000 hours 252,000 45 inspections 57,150 inspections Packing Total estimated 147,000 490,000 units Number of units $1,008,150 cost In addition, management estimated 7,500 direct labor-hours for year 2 Assume that the following cost driver volumes occurred in January, year 2 Institutional Standard Silver Number of units 61,000 25,000 9,000 produced Direct materials $21,000 $37,000 $15,000 Costs Direct labor- 610 450 470 hours Number of orders 10 7 5 Number of 3 2 5 production runs Pounds of 17,000 5,000 2,900 material Machine-hours 590 140 100 Number of 3 4 4 inspections Units shipped 61,000 25,000 9,000 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.) Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Req C 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 Processing orders Setting up production Handling materials Rate per order per run per pound per machine hour Using machines Performing quality control Packing per inspection per unit Req A1 Req A2 Req B Req C 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 Req A1 Req A2 Req B Req C 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 Total Standard Silver $ $ $ $ Direct materials 37,000 21,000 15,000 73,000 Direct labor Indirect costs Total cost Req A1 Req A2 Req B Req 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.) Show lessA Standard Account Institutional Silver Total $ $ 21,000 $ $ 37,000 Direct materials 15,000 73,000 Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost