Question

Southwest Components recently switched to activity-based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates: Activity Centers Cost Drivers Rate per Cost Driver Unit Materials handling Pounds of material handled $ 15 per pound Quality inspections Number of inspections $ 210 per inspection Machine setups Number of machine setups $ 2,500 per setup Running machines Number of machine-hours $ 21.00 per hour Direct materials costs were $297,000 and direct labor costs were $166,000 during July, when the Fabrication Department handled 3,600 pounds of materials, made 740 inspections, had 40 setups, and ran the machines for 14,000 hours. Required: Use T-accounts to show the flow of materials, labor, and overhead costs from the four overhead activity centers through Work-in-Process Inventory and out to Finished Goods Inventory.

Answer 1

Calculated as: