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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: Activity
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: Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled Number of inspections Number of machine setups Number of machine-hours Rate per Cost Driver Unit $ 16 per pound $ 200 per inspection $2,500 per setup $25.ee per hour Direct materials costs were $315.000 and direct labor costs were $133.000 during July, when the Fabrication Department handled 3.700 pounds of materials, made 780 inspections, had 40 setups, and ran the machines for 17.000 hours. Required: Use T-accounts to show the flow of materials, labor, and overhead costs from the four overhead activity centers through Work-in- Process Inventory and out to Finished Goods Inventory. Materials Inventory Wages Payable 0 Beg bal Beg. bal. Direct materials End. bal. End. bal. Overhead Applied: Quality Inspections Overhead Applied: Materials Handling 0 Beg. bal. Beg bal. End. bal. End. bal. Overhead Applied: Running Machines Overhead Applied: Machine Setups 0 Beg. bal Beg. bal End. bal. End. bal. Finished Goods Inventory Work in Process (WIP) Inventory Fabrication Department 0 Beg bal Beg bal
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