Question 3 Shaker Stairs Co. designs and builds 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 $75,000 Handling materials 82,800 Production (cutting, milling, finishing) 220,000 Setting up machin 100,000 108,000 specting Inventory control (raw materials and finished goods 139,440 Utiliti 270,000 $995,240 Total budgeted overhead costs 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 Expected Use o Activity Cost Pools Cost Drivers 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 machin Number of setups 1,250 Number of inspections Inspecting 6,000 Inventory control (raw materials and finished goods Number of components 168,000 Square feet occupied Utiliti 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 $103,800 Direct materials Direct labor $113,100 Machine hours 15,100 Direct labor h 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