Make sure you fill in all Yellow cells. Yellow cells left blank will receive zero cre Problem Sunshield Company makes three types of sunglasses: Nerds, Stars, and Fashions Sunshield presently allocates overhead to products using a rate based on direct recommended that Sunshield switch to activity based costing Management decided to give ABC a try and identified the following activities, cost drivers, and costs for a typical year Use this information to compute the overhead rates for each cost driver Costs Activity Production setup Order processing Material handling Equipment depreciation & Maintenance Quality management Packing & shipping Total Overhead Recommended Cost Driver Production runs Orders Pounds of materials used Machine hours Inspections Units shipped $ 5 $ $ $ $ S 30.000 50,000 20.000 60,000 50.000 40.000 250,000 Estimated Cost Driver Units 100 200 8000 10000 40 20000 runs orders bs machine hours Inspections units 10 11 10 13 In addition, there are 2,500 direct labor-hours in a typical year and direct labor costs are $15 per hour Assume the following activities occurred in February 17 Nerds Stars Fashions $ 10 10 20 21 Units produced Direct materials costs Direct labor hours Orders Production runs Pounds of materials Machine hours Inspections Units Shipped 1,000 4,000 $ 100 8 2 400 500 2 1,000 500 2.500 5 100 8 4 200 300 2 500 400 2.000 89 4 8 200 300 23 20 20 27 300 Problem E o 1) Compute overhead allocations (1) Toreach of the cost drivers recommended by the consultant and (2) for direct labor Estimated Cats Estimated cost driver Activity Production setup Order processing Material handling Te deprec & maint Quality mange Packing and shipping weer the machine hes inspections units Activity Rate (predetermined overhead rate) per per order per pound per machine hour per inspection per unit Direct laber 210.000 DE hours per direct labor hour M Manant was compare the producte sine ABC and the tonal method for the month of February. Compute the production cost for each product for Vebruary sing direct labor 4 hours the allocation base Note: Production con direct internet and lud verhead) Show con the row below when needed) Nerds Stars Fashions Totais Dima Le Director Owad poled ful 35 ARDINDAN TOTAL COST mula medyol Management wants to compare the product costs in ABC and the traditional method for the month of February. Computer COLI hours as the location base Note: Production costs are direct materials, direct laber, and applied overhead) (Show calculations in the row below when needed) Nerds Stars Fashions Totals Direct materials 5 wulenter for you! 1 Direct labor Wwwmulere for you! Overhead applied Om med for you TOTAL COST $ this formed for you i To del product costs under Acavity Based Coating compute the production costs for each product for February using the cost drivers recommended by the consultant Note: To apply owerhead, Toke the actual units of the cost deliver that activity rate for each product Show calculations in the row below) Nerds Stars Fashions Totals Direct materials same as futbol Direct labore Overhead upplied Production home for you formared for you This former for Order processing O Mirafone for you! Zone 22 Material handling Omed for you quip deprecat o former for Quality manpement 7 this for entered for you! Packing and shipping sam redu TOTAL COST for you Estimated Cost Driver Units 100 200 8000 10000 40 20000 runs orders lbs. machine hours Inspections units Recommended 5 Activity Cost Driver Costs Production setup Production runs $ 30,000 7 Order processing Orders $ 50,000 B Materials handling Pounds of materials used $ 20,000 e Equipment depreciation & Maintenance Machine hours $ 60,000 10 Quality management Inspections $ 50,000 11 Packing & shipping Units shipped $ 40,000 12 Total Overhead $ 250,000 13 14 In addition, there are 2,500 direct labor-hours in a typical year and direct labor costs are $15 per hour. 15 Assume the following activities occurred in February 16 17 Nerds Stars 18 Units produced 1,000 500 19 Direct materials costs S 4,000 $ 2,500 $ 20 Direct labor hours 100 100 21 Orders B 8 22 Production runs 2 4 23 Pounds of materials 400 200 Machine hours 500 300 25 Inspections 2 2 20 Units Shipped 1,000 500 Fashions 400 2,000 89 4 8 200 300 2 300 20 Problem E Activity Rate (predetermined overhead rate) per un 1 tl Compute overhead allocation rates (1) for each of the cost drivers recommended by the consultant and (2) for direct labor 12 Activity Estimated costs Estimated cost driver 34 Production setup runs Order processing orders 30 Material handling 37 Equip deprec& maint machine hrs at mangement Inspection 10 Packing and thieping units 40 41 Direct labor 250,000 DL hours per order per pound (1) per machine hour per inspection per unit per direct labor how 41 44 46 (5) Management wants to compare the product tout sing ABC and the traditional method for the month of February. Compute the production costs for each product for February using direct labor hours as the allocation base. (Nota Production costs are direct materials, direct labor, and applied overhead.) Show calculations in the row below when needed) 7 Nerds Stars s Direct materials Fashions Totals 5 dow Direct labor home entered for you! 53 54 Overhead applied SE TOTAL COST 17 the folder ND 00 I To derive product costs under Activity Based Costing, compute the production costs for each product for February using the cost drivers recommended by the consultant Note: To apply overhead, take the actual units of the cost driver that activity rate for each product (Show calculations in the row below) Nerds Stars Fashion Total a formulated for your O formule entered frow os Direct materials amante Direct labor minuta 7 Overhead applied u Production et 70 Order processing Osmand for you! 1 SM per his formulated for you! 78 Material handing 33 14 Equip deprec& maint 75 78 Quality management os formulatered for you! ose med for you ES Packing and shipping Oferuil entered for you 79 TOTAL COST $ haute med for you 1 02 Id Management has seen your numbers and wants to know how you account for the discrepancy, butween the product costs using direct labore hours as the allocation base to apply overhead versus using activity based costing to apply overhead. Write a brief response to management with your explanation