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 Amount Purchasing $75.000 Handling materials 82,000 Production (cutting, milling, finishing) 220,000 Setting up machines Inspecting 108,000 Inventory control (raw materials and finished goods) 126,000 Utilities 360,000 Total budgeted overhead costs $1,071.000 100,000 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 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 Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Cost Drivers Number of orders Number of moves Direct labor hours Number of setups Number of inspections Number of components 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 Number of components Number of square feet occupied $104,000 $112,400 15,000 5,700 60 800 100 450 16,000 8,000 Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, eg. 12.25.) Predetermined overhead rate $ per machine hour What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.) Cost per stairway Calculate activity-based overhead rate for each activity. (Round answers to 2 decimal places, eg. 12.25.) Activity Overhead Rate Purchasing $ per order $ $ per move Handling materials Production $ per D/L hour $ per setup Setting up machines $ per inspection Inspecting $ per component Inventory control $ per sq. ft. Utilities Calculate total overhead assigned under ABC. Total overhead assigned $ What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, eg. 12.25.) Total manufacturing cost per stairway $
