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 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 $ 36 per pound $ 450 per inspection $5,400 per setup $ 45 per hour Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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.
*** Where I put numbers might not actually even have a number.

Answer 1

	Materials inventory				Wages payable
Beg bal	0				beg bal	0
		600,000	WIP				300,000	WIP
End bal		600,000			End bal		300,000
overhead Applied:Materials handling					overhead applied:Quality inspections
beg.bal	0				Beg.bal	0
		108000					225000
end bal		108,000			End bal		225,000
overhead applied :Machine setups					overhead applied:Running Machines
beg.bal	0				Beg.bal	0
		135000					450000
end bal		135,000			End bal		450,000
Work in process inventory					Finished goods inventory
Beg bal	0				beg.bal	0
direct mat	600,000	1,818,000	finished goods		WIP	1,818,000
dir labor	300,000
mat handing	108,000
quality inp	225,000
mac setup	135,000
running ma	450,000
end balc	0				End bal	1,818,000