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Southwest Components recently switched to activity-based costing from the department allocation method. The Fabrication Department manager...

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 $ 17 per pound
Quality inspections Number of inspections $ 230 per inspection
Machine setups Number of machine setups $ 2,900 per setup
Running machines Number of machine-hours $ 21.00 per hour

Direct materials costs were $283,000 and direct labor costs were $154,000 during July, when the Fabrication Department handled 3,700 pounds of materials, made 720 inspections, had 50 setups, and ran the machines for 17,000 hours.

Materials Inventory Wages Payable
Beg. bal. Beg. bal.
End. bal. End. bal.
Overhead Applied: Materials Handling Overhead Applied: Quality Inspections
Beg. bal. Beg. bal.
End. bal. End. bal.
Overhead Applied: Machine Setups Overhead Applied: Running Machines
Beg. bal Beg. bal.
End. bal. End. bal.
Work in Process (WIP) Inventory Fabrication Department Finished Goods Inventory
Beg. bal Beg. bal
End. bal. 0 End. bal.

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ekkarill92 answered 2 years ago
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