| | Problem 4-3A a-b, c1-c3 (Video) Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2020 are as follows. | Overhead Cost Pools | | Amount | | Purchasing | | $75,000 | | Handling materials | | 82,000 | | Production (cutting, milling, finishing) | | 210,000 | | Setting up machines | | 100,000 | | Inspecting | | 96,000 | | Inventory control (raw materials and finished goods) | | 126,000 | | Utilities | | 270,000 | | Total budgeted overhead costs | | $959,000 | For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2020, 100,000 machine hours are budgeted. Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolans request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. | Activity Cost Pools | | Cost Drivers | | Estimated Use of Cost Drivers | | Purchasing | | Number of orders | | 600 | | Handling materials | | Number of moves | | 8,000 | | Production (cutting, milling, finishing) | | Direct labor hours | | 100,000 | | Setting up machines | | Number of setups | | 1,250 | | Inspecting | | Number of inspections | | 6,000 | | Inventory control (raw materials and finished goods) | | Number of components | | 168,000 | | Utilities | | Square feet occupied | | 90,000 | Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steves request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways. | Direct materials | | $104,500 | | Direct labor | | $112,100 | | Machine hours | | 15,000 | | Direct labor hours | | 5,700 | | Number of purchase orders | | 60 | | Number of material moves | | 800 | | Number of machine setups | | 100 | | Number of inspections | | 450 | | Number of components | | 16,000 | | Number of square feet occupied | | 8,000 | | | | | | Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.) | Predetermined overhead rate | | $ | per machine hour | | | | | | | What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.) | | | | | Calculate activity-based overhead rate for each activity. (Round answers to 2 decimal places, e.g. 12.25.) | Activity | | Overhead Rate | | Purchasing | | $ | per order | | Handling materials | | $ | per move | | Production | | $ | per D/L hour | | Setting up machines | | $ | per setup | | Inspecting | | $ | per inspection | | Inventory control | | $ | per component | | Utilities | | $ | per sq. ft. | | | | | | Calculate total overhead assigned under ABC. | Total overhead assigned | | $ | | | | | | What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, e.g. 12.25.) | Total manufacturing cost per stairway | | $ | | Click if you would like to Show Work for this question: | Open Show Work | | | | | | | By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. | | Question Attempts: Unlimited | | SAVE FOR LATER | SUBMIT ANSWER | | | | |
