60.1K

Verified Solution

Link Copied!

College Supply Company (CSC) makes three types of drinking glasses short, medium, and tall. It presently applies overhead using a predetermined rate based on direct labor-hours. A group of company employees recommended that CSC switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for Year 5 for each activity center Recommended Estimated Estimated cost Activity Cost Driver Cost Driver Units Setting up production Number of production runs $ 24,000 80 runs Processing orders Number of orders 46,800 180 orders Handling materials Pounds of materials 18,000 9,000 pounds Using machines Machine.hours 50,000 10,000 hours Providing quality management Number of inspections 48,000 40 inspections Packing and shipping Units shipped 36,000 18,000 units $222,800 In addition, management estimated 2,000 direct labor hours for year 5 Assume that the following cost driver volumes occurred in February, year 5. Number of units produced Direct materials costs Direct labor-hours Number of orders Number of production runs Pounds of material Machine-hours Number of inspections Units shipped Short 1,200 $4,000 80 7 1 380 500 2 1,200 Medium 600 $2,500 100 8 4 800 400 2 600 Tall 500 $2,000 120 3 7 200 200 2 40e Direct labor costs were $22 per hour Required: a. Compute a predetermined overhead rate for year 5 for each cost driver recommended by the employees. Also compute a predetermined rate using direct labor hours as the allocation base b. Compute the production costs for each product for February using direct labor hours as the allocation base and the predetermined rate computed in requiremento c. Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates computed in requiremento (Note: Do not assume that total overhead applied to products in February will be the same for activity based costing as it was for the labor-hour based allocation) Complete this question by entering your answers in the tabs below. Required A Required B Required Compute a predetermined overhead rate for year for each cost driver recommended by the employees. Also computea predetermined rate using direct labor hours as the allocation base. (Round your answers to 2 decimal places) Activity Allocation Rate Setting up production per fun Processing orders per order Handling materials Using machines per hour Performing quality management per insp Packing & shipping Direct labor hour rate perib per un (per hour Complete this question by entering your answers in the tabs below. Required A Required B Required Compute the production costs for each product for February using direct labor hours as the allocation base and the predetermined rate computed in requirement a. (Do not round intermediate calculations.) Tall Short Medium 4,000 5 2.500 5 5 2,000 Direct materials Direct Inbor Overhead Total costs Complete this question by entering your answers in the tabs below. Required A Required B Required Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates computed in requirement a. (Note: Do not assume that total overhead applied to products in February will be the same for activity-based costing as it was for the labor-hour-based allocation.) (Do not round intermediate calculations.) Show less Tall Short Medium 4,000 $ 2.500 5 $ 2000 Direct materials Direct labor Setting up production Processing orders Handling materials Using machines Performing quality management Shipping Total costs

Answer & Explanation Solved by verified expert

See Answer