Problem 4-3A 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 2017 are as follows.

Overhead Cost Pools	Amount
Purchasing	$74,400
Handling materials	82,160
Production (cutting, milling, finishing)	220,000
Setting up machines	101,250
Inspecting	120,000
Inventory control (raw materials and finished goods)	136,080
Utilities	270,000
Total budgeted overhead costs	$1,003,890

For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2017, 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 Nolan?s 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	Expected 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 Steve?s 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	$104,000
Direct labor	$112,800
Machine hours	14,600
Direct labor hours	5,300
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