Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2020 are as follows. Overhead Cost Pools Amount Purchasing $75,000 Handling materials 82,000 Production (cutting, milling, finishing) 210,000 Setting up machines 100,000 Inspecting 120,000 Inventory control (raw materials and finished goods) 126,000 Utilities 450,000 Total budgeted overhead costs $1,163,000 For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2020, 100,000 machine hours are budgeted. Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolan’s request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Activity Cost Pools Cost Drivers Estimated Use of Cost Drivers Purchasing Number of orders 600 Handling materials Number of moves 8,000 Production (cutting, milling, finishing) Direct labor hours 100,000 Setting up machines Number of setups 1,250 Inspecting Number of inspections 6,000 Inventory control (raw materials and finished goods) Number of components 168,000 Utilities Square feet occupied 90,000 Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steve’s request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways. Direct materials $104,600 Direct labor $112,400 Machine hours 15,000 Direct labor hours 5,100 Number of purchase orders 60 Number of material moves 800 Number of machine setups 100 Number of inspections 450 Number of components 16,000 Number of square feet occupied 8,000 (a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate $Type your answer here per machine hour (b) What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.) Cost per stairway $Type your answer here

Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2020 are as follows. Overhead Cost Pools Amount Purchasing $75,000 Handling materials 82,000 Production (cutting, milling, finishing) 210,000 Setting up machines 100,000 Inspecting 120,000 Inventory control (raw materials and finished goods) 126,000 Utilities 450,000 Total budgeted overhead costs $1,163,000 For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2020, 100,000 machine hours are budgeted. Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolan’s request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Activity Cost Pools Cost Drivers Estimated Use of Cost Drivers Purchasing Number of orders 600 Handling materials Number of moves 8,000 Production (cutting, milling, finishing) Direct labor hours 100,000 Setting up machines Number of setups 1,250 Inspecting Number of inspections 6,000 Inventory control (raw materials and finished goods) Number of components 168,000 Utilities Square feet occupied 90,000 Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steve’s request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways. Direct materials $104,600 Direct labor $112,400 Machine hours 15,000 Direct labor hours 5,100 Number of purchase orders 60 Number of material moves 800 Number of machine setups 100 Number of inspections 450 Number of components 16,000 Number of square feet occupied 8,000 (a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate $Type your answer here per machine hour (b) What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.) Cost per stairway $Type your answer here

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 4CMA: Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold...

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(a)

Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.)

Predetermined overhead rate

$Type your answer here

per machine hour

(b)

What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.)

Cost per stairway

$Type your answer here

(c1)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(c2)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(c3)

The parts of this question must be completed in order. This part will be available when you complete the part above.

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Overhead Cost Pools		Amount
Purchasing		$75,000
Handling materials		82,000
Production (cutting, milling, finishing)		210,000
Setting up machines		100,000
Inspecting		120,000
Inventory control (raw materials and finished goods)		126,000
Utilities		450,000
Total budgeted overhead costs		$1,163,000

Activity Cost Pools	Cost Drivers	Estimated Use of Cost Drivers
Purchasing	Number of orders	600
Handling materials	Number of moves	8,000
Production (cutting, milling, finishing)	Direct labor hours	100,000
Setting up machines	Number of setups	1,250
Inspecting	Number of inspections	6,000
Inventory control (raw materials and finished goods)	Number of components	168,000
Utilities	Square feet occupied	90,000

Direct materials		$104,600
Direct labor		$112,400
Machine hours		15,000
Direct labor hours		5,100
Number of purchase orders		60
Number of material moves		800
Number of machine setups		100
Number of inspections		450
Number of components		16,000
Number of square feet occupied		8,000