Question

*Problem 5-39A (Part Level Submission)

Stellar Stairs Co. designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are made of white oak wood. The company’s budgeted manufacturing overhead costs for 2016 are as follows: Overhead Cost Pools Amount Purchasing $69,000 Handling materials 82,000 Production (cutting, milling, finishing) 210,000 Setting up machines 95,000 Inspecting 90,000 Inventory control (raw materials and finished goods) 126,000 Utilities 180,000 Total budget overhead costs $852,000 For the last four years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For 2016, it has budgeted 100,000 machine hours. Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Kiko Nishikawa, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar’s request, Kiko and the production foreperson 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 770 Handling materials Number of moves 8,600 Production    (cutting, milling, finishing) Direct labour hours 109,350 Setting up machines Number of set-ups 1,590 Inspecting Number of inspections 6,580 Inventory control    (raw materials and finished goods) Number of components 169,000 Utilities Square metres occupied 9,010    Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason’s request, Kiko prepares cost estimates for producing components for 280 stairways so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways: Direct materials $103,600 Direct labour 112,000 Machine hours 14,500 Direct labour hours 5,000 Number of purchase orders 60 Number of material moves 800 Number of machine set-ups 100 Number of inspections 450 Number of components 16,000 Number of square metres occupied 800

Predetermined overhead rate using traditional costing with machine hours as the basis Predetermined overhead rate $ 8.52 per machine hour

Manufacturing cost per stairway under traditional costing. Manufacturing cost per stairway $ 1211.21

	What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, e.g. 15.25.)
Manufacturing cost per stairway		$

Answer 1