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 Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Total budgeted overhead costs Amount $75,000 82,000 210,000 95,000 114,000 126,000 360,000 $1.062,000 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 Stars 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 Purchasing Number of orders Handling materials Number of moves Production (cutting, milling, finishing) Direct labor hours Setting up machines Number of setups Inspecting Number of inspections Inventory control (raw materials and finished goods) Number of components Utilities Square feet occupied Estimated Use of Cost Drivers 600 8,000 100,000 1.250 6,000 168,000 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 Direct labor Machine hours Direct labor hours Number of purchase orders Number of material moves Number of machine setups Number of inspections $103.900 $112.800 15,000 5,200 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. $103,900 $112,800 15,000 5,200 Direct materials Direct labor Machine hours Direct labor hours Number of purchase orders Number of material moves Number of machine setups Number of inspections Number of components Number of square feet occupied 800 450 16,000 8,000 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/Lhour Setting up machines $ per setup Inspecting per inspection Inventory control per component Utilities per sq. ft. e Textbook and Media
