Question
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 Cost Drivers Rate per Cost Driver Unit Materials handling Pounds of material handled $ 19 per pound Quality inspections Number of inspections $ 220 per inspection Machine setups Number of machine setups $ 2,500 per setup Running machines Number of machine-hours $ 22.00 per hour Direct materials costs were $317,000 and direct labor costs were $161,000 during July, when the Fabrication Department handled 4,000 pounds of materials, made 790 inspections, had 40 setups, and ran the machines for 14,000 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 Beg. bal. Beg. bal. End. bal. End. ba. Overhead Applied: Materials Handling Overhead Applied: Quality Inspections Beg. bal. Beg. bal. End. bal End. bal Overhead Applied: Machine Setups Overhead Applied: Running Machines Beg. bal Beg. bal. End. bal. End. bal. Work in Process (WIP) Inventory Fabrication De Finished Goods Inventory Beg. bal Beg. bal End. bal. 0 End. bal
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