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) 210,000 Setting up machines 100,000 Inspecting 102,000 Inventory control (raw materials and finished goods) 126,000 Utilities 270,000 Total budgeted overhead costs $965,000 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 Cost Drivers Estimated Use of 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 $104,500 Direct labor $112,200 Machine hours 15,000 Direct labor hours 5,400 Number of purchase orders 60 800 Number of material moves Number of machine setups 100 450 Number of inspections Number of components 16,000 Number of square feet occupied 8,000 Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate $ per machine hour What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, eg. 12.25.) Cost per stairway $ 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/L hour Setting up machines $ per setup Inspecting $ $ per inspection Inventory control $ per component Utilities $ per sq. ft. 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 $ $
