Question

way co d es , m and o r e Problem 17-3 Shaker Co designs and build factory-made premium wooden stairways for homes. The manufactured of white cakwood Budgeted manufacturing overhead costs for the year 2017 are as follows Overhead Coat Pools Purchasing $75,600 Handling materials 82,000 Production using milling, fishing 214,000 Setting machines 101,20 Inspecting 120,000 Inventory control raw materials and finished goods) 141.120 Utilities To buted overhead co $1,134 For the last 4 years, Shaker Stars has been charging overhead to products on the basis of machine hors. For the year 2017, 100,000 machine hours are budgeted Jeremylan, owner manager of SharStars Co, recently directed counte rento implement the c o w that he dy pred Army formandentify the low cost vers and therefore prev e d overdost Cost Drivers Activity Cost Pool Purchasing Handling materials Production in hing! Setting machines Cost Drivers Number of orders Number of moves Duct labor Number of Number of inspection Number of components Square feet Inventory control l ers and finished goods) Steve Hannon as manage has received an order for 250 ways from Community Builders, Inc, large housing devement contractor At Steve's requests prepares cost estimates for producing Steve can submit a contract price per way to community Builders. He w a s the following data for the production of 20 stairways $104,600 Direct materias Direct labor Director hours Number of purchase orders Number of mater Number of concent Number of wuare feet reupled 16.000 3,000

Answer 1

1.

Predetermined overhead rate = Estimated overhead costs / Estimated machine hours

Predetermined overhead rate = $1,184,050 / 100,000 = $11.84 per machine hour

2.

Cost per stairway:

Total manufacturing cost = $104,600+112,400+181,152 (15,300*$11.84) = $398,152

Cost per stairway = $398,152 / 250 = $1,592.61

3.

Activity	Overhead rate
Purchasing	$126 (75,600/600)	per order
Handling materials	10.26 (82,080/8,000)	per move
Production	2.14 (214,000/100,000)	per D/L hour
Setting up machines	81 (101,250/1,250)	per setup
Inspecting	20 (120,000/6,000)	per inspection
Inventory control	0.84 (141,120/168,000)	per component
Utilities	5 (450,000/90,000)	per sq.ft.

4.

Purchasing	$7,560 (60*$126)
Handling materials	8,208 (800*$10.26)
Production	10,914 (5,100*$2.14)
Setting up machines	8,100 (100*$81)
Inspecting	9,000 (450*$20)
Inventory control	13,440 (16,000*$0.84)
Utilities	40,000 (8,000*$5)
Total overhead assigned	$97,222

5.

Total cost per stairway:

Total manufacturing cost = $104,600+112,400+97,222 = $314,222

Cost per stairway = $314,222 / 250 = $1,256.89