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Southwest Components recently switched to activity based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates:
Southwest Components recently switched to activity based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates: rate per Activity Center Cost Drivers Cost Driver Unit Materials handling Pounds of material handled $ 18 per pound Quality inspections Number of inspections $ 230 per inspection Machine setup Number of machine setups $2,700 per setup Running Machines Number of machine-hours $20.00 per hour Direct materials costs were $290,000 and direct labor costs were $161,000 during July, when the Fabrication Department handled 4,000 pounds of materials, made 780 inspections, had 40 setups, and ran the machines for 15,000 hours. Required: Use T-accounts to show the flow of mloteriais, labor, and overhead costs from the four overhead activity centers through Work-in. Process Inventory and out to Finished Goods Inventory. Materials inventory Beg. bal. Wages Payable Begal Endbal Endel Overhead Applied Material Handling Overhead Applied: Quality Inspections Beg bal Beg bal Endbal Endbol Overhead Applied: Machine Setups Overhead Applied: Running Machines Beghe Bog, bal
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