Please give explanation on how to get each number, thanks!
Problem 9-51 Activity-Based Costing and Predetermined Overhead Allocation Rates (LO 9-3, 5, 6) 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 Processing orders Setting up production Handling materials Machine depreciation and maintenance Performing quality control Packing Total estimated cost Recommended Cost Driver Number of orders Number of production runs Pounds of materials used Machine-hours Number of inspections Number of units Estimated Cost $ 41,125 128,000 325,000 210,000 48,300 96,000 $848,425 Estimated Cost Driver Activity 175 orders 80 runs 130,000 pounds 10,000 hours 35 inspections 480,000 units In addition, management estimated 7,300 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January, year 2: Institutional 65,000 $39,000 400 Standard 24,000 $24,000 490 Silver 8,000 $17,000 560 13 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 14,000 580 5,000 150 2,900 80 65,000 24,000 8,000 Actual labor costs were $16 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. (Round your answers to 2 decimal places.) order Activity Processing orders Setting up production Handling materials Using machines Performing quality control Packing Rate per order per run per pound per machine hour per inspection per unit (2) 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 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.) Institutional $ 39,000 Standard $ 24,000 Silver 17,000 Total 80,000 $ $ Account Direct materials Direct labor Indirect costs Total cost $ 39,000 $ 24,000 $ 17,000 $ 80,000 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.) Institutional $ 39,000 Standard $ 24,000 $ Silver 17,000 $ Total 80,000 Direct materials Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost $ 39,000 $ 24,000 $ 17,000 $ 80,000
