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. Recommended Activity Cost Driver Processing orders Number of orders Setting up production Number of production runs Handling materials Pounds of materials used Machine depreciation and maintenance Machine-hours Performing quality control Number of inspections Packing Number of units Total estimated cost Estimated Cost $ 46,125 216,000 350,000 209,000 52,400 144.000 $1,017,525 Estimated Cost Driver Activity 225 orders 120 runs 140,000 pounds 11,000 hours 40 inspections 480,000 units In addition, management estimated 7,700 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January, year 2: Institutional 61,000 $43,000 470 Standard 25,000 $25,000 450 Silver 8,000 $15,000 560 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 12.000 610 6.000 130 3,200 61,000 25,000 8,000 Actual labor costs were $15 per hour. 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 $ 43,000 7,050 Standard $ 25,000 6,750 $ Silver 15,000 8,400 $ Total 83,000 22,200 Account Direct materials Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost $ 50,050 $ 31,750 $ 23,400 $ 105,200