Reference no: EM131750497

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 2017 are as follows.

Overhead Cost Pools Amount
Purchasing $75,600
Handling materials 82,720
Production (cutting, milling, finishing) 218,000
Setting up machines 96,250
Inspecting 96,000
Inventory control (raw materials and finished goods) 129,360
Utilities 270,000
Total budgeted overhead costs $967,930

For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2017, 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 Expected 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 $103,800
Direct labor $112,700
Machine hours 15,500
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.
b. What is the manufacturing cost per stairway under traditional costing
c. Calculate activity-based overhead rate for each activity
d. calculate the total overhead assigned under ABC
e. What is the manufacturing cost per stairway under the proposed activity-based costing?
PLEASE answer all parts I really need help and soon too!