Question

Problem 9-51 Activity-Based Costing and Predetermined Overhead Allocation Rates (LO 9-3, 5, 6) Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver. It applies all indirect costs according to a predetermined rate based on direct labor-hours. A consultant recently suggested that the company switch to an activity-based costing system and prepared the following cost estimates for year 2 for the recommended cost drivers. Activity Processing orders Setting up production Handling materials Machine depreciation and maintenance Performing quality control Packing Total estimated cost Recommended Cost Driver Number of orders Number of production runs Pounds of materials used Machine-hours Number of inspections Number of units Estimated Cost $ 41,125 128,000 325,000 210,000 48,300 96,000 $848,425 Estimated Cost Driver Activity 175 orders 80 runs 130,000 pounds 10,000 hours 35 inspections 480,000 units In addition, management estimated 7,300 direct labor-hours for year 2. Assume that the following cost driver volumes occurred in January, year 2: Institutional 65,000 $39,000 400 Standard 24,000 $24,000 490 Silver 8,000 $17,000 560 13 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 14,000 580 5,000 150 2,900 80 65,000 24,000 8,000 Actual labor costs were $16 per hour.
Please give explanation on how to get each number, thanks!

Answer 1

* Kitchen supply Inc. manufa thaee types of 1 21 3 Activity processing orders & 235 setting up Production $ 1600 Handling materials 2.5 using machine $ 21 Performing quality control & 1380 packing Ls 0.2 Rare per codes pes run pes pound Per machine hous pes inspection pes unit s 6 Explanation: J $41125 = 175 Ordes - 3p 128000 80 runs 3 3) is 325000 - 130,000 Pound 25 210000 10000 Hous 5 & 48300 = 35 inspection of 96000 = 4.80000 Unit $235 pesordes + 1600 oun & 2.5 pes pound P 21 Pei HOUY & 1380 Pes inspection 0.2 per unit (a) predetermined sare pes DL HOUR $116.22 - Estimated activity & Estimated Allocation base $ 848, 425 = 7300 Labor Hour s 116.22 2

206) Account Institutional standard silves TOTAL orect materials & 39000 s 24000 & ITOOO & 80,000 orect labor 1$ 6400 $ 7840$ 8960s 23200 Indirent costs $ 46489 & 56949 $ 65085 & 1685231 Totoy cost s 91889 1 $88789 & 91045 ls 2 71, 723 pixect labor: institutional : 2) standard : 3 silves $ 16pes Hour X $ 16 Per Hour x S 16 per hour X 400 = 490 = 560 = $ 6400 $ 7840 8960 Indrrect cost : Institutional : 2 standaod 3 silves $848425 7300 X 400 = $ 46 489 $ 8484257300 X 490 = $ 56.949 $ 848425 = 7300 X 560 & 65085

2C) Account Institutional standard I silves - TOTOY Direct motejals $ 39000 24000 17000 $80,000 DISCChabox ( se 9. 206) 6400 7840 8960 23200 Indiae c cost: processing orders 3055 2015 1410 $ 6580 setting up prod. 4 800 4800 9600 1 19200 Handling mat. 35000 12 500 725E 547.50 using machine 12180 3150 1680 17010 perfo.quality control 5520 4140 414O & 13800 Pocking 113 OGO 4800 1600s 19400 Torcy cost $ 118955 $ 63,345 $51640 & 233940 ) Co processing Ordes. Lu Inst. 13 2) stand 9 W 3 silves: 6 Codes X $235 Pes orele = $3055 ordes X & 2.35 peroader = $2115. ordes X s 235 pe orele = $ 1410 (2) setting up prod 1) Inst 2 stana 3) silver . : 3 oun x 3 oun x Grin x $ 1600 per un = $ 1600 peonun = 1600 Pernun - $4800. $4800 9600 Handling mata Tu Inst 2) stona 132 cive, 14000 pound & 5000 Pound X 2900 Pound x $2.5pes pound $2.5pes pound $25pes pound $ 35000 4 12 500 3250

(1) using machine 1) 2 113 Instit. : 580 mH x $21 Pes Hous = $12180 standaag : 150mH X $21 Pes Hours $ 3150 silves 80mH X 521 Pes Hour 16801 (5) Perfomancee quality controle 11 4 Instit. standard inspection & inspection X inspection & $1380 Poins = 5520 $ 1380 Pesinsp = 4140 $ 1380 pesinsp= 4140 silves (6 packing 1 (2) 13 Instit standard silver : 65000 unit X 24000 unit x 8000 unit & $0.2 P.U = $0.2 P.U = $0.2 P.O- $ 13000 4800 16000