Problem 5-39A (Part Level Submission)

Stellar Stairs Co. designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are made of white oak wood. The company's budgeted manufacturing overhead costs for 2016 are as follows:

Overhead Cost Pools

Amount

Purchasing

$69,000

Handling materials

82,000

Production (cutting, milling, finishing)

210,000

Setting up machines

95,000

Inspecting

90,000

Inventory control (raw materials and finished goods)

126,000

Utilities

180,000

Total budget overhead costs

$852,000

For the last four years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For 2016, it has budgeted 100,000 machine hours.

Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Kiko Nishikawa, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar's request, Kiko and the production foreperson 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

770

Handling materials

Number of moves

8,600

Production

(cutting, milling, finishing)

Direct labour hours

109,350

Setting up machines

Number of set-ups

1,590

Inspecting

Number of inspections

6,580

Inventory control

(raw materials and finished goods)

Number of components

169,000

Utilities

Square metres occupied

9,010

Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason's request, Kiko prepares cost estimates for producing components for 280 stairways so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways:

Direct materials

$103,600

Direct labour

112,000

Machine hours

14,500

Direct labour hours

5,000

Number of purchase orders

60

Number of material moves

800

Number of machine set-ups

100

Number of inspections

450

Number of components

16,000

Number of square metres occupied

800

Predetermined overhead rate

$ 8.52

per machine hour

traditional costing Manufacturing cost per stairway 1211.21

What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, e.g. 15.25.) Manufacturing cost per stairway