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	$	42,000		200	orders
Setting up production	Number of production runs		192,000		120	runs
Handling materials	Pounds of materials used		300,000		120,000	pounds
Machine depreciation and maintenance	Machine-hours		252,000		12,000	hours
Performing quality control	Number of inspections		62,500		50	inspections
Packing	Number of units		122,500		490,000	units
Total estimated cost		$	971,000

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		64,000			23,000			7,000
Direct materials costs	$	38,000		$	21,000		$	17,000
Direct labor-hours		470			450			640
Number of orders		10			7			7
Number of production runs		4			2			7
Pounds of material		13,000			5,000			2,600
Machine-hours		580			150			60
Number of inspections		2			4			3
Units shipped		64,000			23,000			7,000

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. (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.)

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.) Rate per order per run Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing per pound per machine hour per inspection per unit Req A1 Req A2 Req B Reqc 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 Standard Silver Total Direct materials $ 38,000 $ 21,000 $ 17,000 $ 76,000 Direct labor Indirect costs Total cost Req A1 Req A2 Req B Reqc 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 Account Institutional Standard Silver Total Direct materials 38,000 $ 21,000 $ 17,000 $ 76,000 Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost