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 $ 47,600 144,000 308,000 Estimated Cost Driver Activity 209 orders 90 runs 110,00 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 210,000 50,400 96,000 $855,400 10,000 hours 40 inspections 480,000 units In addition, management estimated 7,700 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 60,000 21,000 10,000 Direct materials costs $36,000 $25,000 $12,000 Direct labor-hours 430 430 580 Number of orders 12 9 7 Number of production runs 3 3 6 Pounds of material 17.000 5,000 2,900 Machine-hours 610 150 70 Number of inspections 2 2 2 Units shipped 60,000 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 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 (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 Reg A2 Reg B Reqc units prepared by the consultant. (Round your answers to 2 decimal places.) Compute a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver Rate Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing per order per run per pound per machine hour per inspection per unit ROGAT Reg A2 > a. Required: (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 (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 o. (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 Reg Reg Regc 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 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 requiremento (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. Reg A1 Req A2 Red B Reqc 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.) Institutional Standard $ 36,000 $ 25,000 $ Silver 12,000 $ Total 73,000 Account Direct materials 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 o. (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 ReqB Regc 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 Institutional Standard S 36,000 $ I 25.000 $ Silver 12 000 $ Total 73,000 Account Direct materials Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost
