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 $ 75,000 Purchasing 82.000 210,000 Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) 105,000 96,000 126,000 Utilities 360,000 $ 1,054.000 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 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. Estimated Use of Cost Drivers Activity Cost Pools Cost Drivers Purchasing Numaralarda 600 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 Estimated Use of 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 machines Number of setups 1.250 Inspecting Number of inspections 6,000 Inventory control (raw materials and finished goods) Number of components 168,000 Utilities Square feet occupied 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 $ 103,900 $113,100 Direct labor Machine hours 15.000 Direct labor hours 5.400 60 800 100 Number of purchase orders Number of material moves Number of machine setups Number of inspections Number of components Number of square feet occupied 450 16,000 8,000
