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P4-3B Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2011 are as follows. Overhead Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Total budget overhead costs Amount $ 35,000 50,000 130,000 55,000 60,000 80,000 100,000 $510,000 For the last 4 years, Luxury Furniture has been charging overhead to products on the basis of materials cost. For the year 2011, materials cost of $500,000 were budgeted. Sam Pluemer, owner-manager of Luxury Furniture, recently directed his accountant, Ben Borke, to implement the activity-based costing system that he has repeatedly pro- posed. At Sam Pluemer's request, Ben and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Overhead Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Activity Cost Drivers Number of orders Number of moves Direct labor hours Number of setups Number of inspections Expected Use of Cost Drivers 500 5,000 65,000 1,000 4,000 Number of components Square feet occupied 40,000 50,000 P4-3B Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2011 are as follows. Overhead Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Total budget overhead costs Amount $ 35,000 50,000 130,000 55,000 60,000 80,000 100,000 $510,000 For the last 4 years, Luxury Furniture has been charging overhead to products on the basis of materials cost. For the year 2011, materials cost of $500,000 were budgeted. Sam Pluemer, owner-manager of Luxury Furniture, recently directed his accountant, Ben Borke, to implement the activity-based costing system that he has repeatedly pro- posed. At Sam Pluemer's request, Ben and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Overhead Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Activity Cost Drivers Number of orders Number of moves Direct labor hours Number of setups Number of inspections Expected Use of Cost Drivers 500 5,000 65,000 1,000 4,000 Number of components Square feet occupied 40,000 50,000

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