Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver. It applies all indirect costs according to system and prepared the following cost estimates for year 2 for the recommended cost drivers d rate based on direct labor-hours. A consultant recently suggested that the company switch to an activity-based costing Recommended Cost Driver Estimated C Processing orders Setting up production Handling materials Machine depreciation and maintenance Number of orders Number of production runs Pounds of materials used Machine-hours Number of inspections Number of units $ 42,000 187,000 242,000 247,000 75,900 125,000 $918,900 200 orders 110 runs 110,000 pounds Packing Total estimated cost 500,000 units In addition, management estimated 7,800 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January. year 2: 57,000 $38,000 480 21,000 $21,000 480 10 10,000 $15,000 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 2,600 6,000 140 13,000 57,000 21,000 10,000 Actual labor costs were $16 per hour. Required: (1) Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated 2 decimal places.) cost driver units prepared by the consultant. (Round your answers to Answer is complete and correct 21000 per order Processing orders Setting up production Handling materials Using machines Performing quality control 1,380.00per inspection Packing 1,700.00per un s 220 per pound 19.00hour per machine 0.25per unit (2) Compute a predetermined rate for year 2 using direct labor-hours as the allocation base. (Round your answer to 2 decimal places.) Answer is complete and correct. $ 117.81 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.) Answer is complete and correct. 21,000 15,000 $ 74,000 Direct materials Direct labor ndirect costs Total cost 38,000 76807.68010225600 5654956,54975,38188,496 s s 102.229 85,229 100,638 288.096 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 calculations.) 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 Institutional Standard Silver S 38,000 Direct materials Direct labor Indirect costs 21,000 S 4,000 15,000 10.240 7.880 7,680 25,600 Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost 45,68028.680 25 240 99,600
