### Oriole Stairs Co. Overhead Cost Analysis for 2025Oriole Stairs Co. specializes in the design and construction of high-end, factory-made wooden staircases for residential homes. The company manufactures stairway components including spindles, risers, hangers, and handrails, which accommodate stairways of various lengths and widths, all crafted from white oak wood.#### Budgeted Manufacturing Overhead Costs for 2025The projected overhead costs for the year 2025 are outlined in the table below:| Overhead Cost Pools | Amount ||----------------------------------------|----------|| Purchasing | $75,000 || Handling materials | $82,000 || Production (cutting, milling, finishing)| $220,000 || Setting up machines | $105,000 || Inspecting | $108,000 || Inventory control (raw materials and finished goods) | $126,000 || Utilities | $270,000 || **Total budgeted overhead costs** | **$986,000** |For the past four years, Oriole Stairs Co. has applied overhead allocation to products based on machine hours. For the fiscal year 2025, 100,000 machine hours have been estimated.#### Transition to Activity-Based CostingTo enhance costing accuracy, Jeremy Nolan, the owner-manager of Oriole Stairs Co., directed accountant Bill Seagren to implement an activity-based costing system, as periodically suggested. Working in conjunction with Bill, Jeremy and the production foreman identified cost drivers and their estimated usage for each overhead cost pool, summarized as follows:| 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 |#### Cost Estimate Example for New OrderSteve Hannon, the sales manager, ### Traditional and Activity-Based Costing in Manufacturing**What is the manufacturing cost per stairway under traditional costing?** *(Round answer to 2 decimal places, e.g., 12.25.)*- **Cost per stairway:** $1499.44**Calculate activity-based overhead rate for each activity.** *(Round answers to 2 decimal places, e.g., 12.25.)*| Activity | Overhead Rate ||-------------------------|----------------------------------|| Purchasing | $125.00 per order || Handling materials | $10.25 per move || Production | $2.20 per D/L hour || Setting up machines | $84.00 per setup || Inspecting | $18.00 per inspection || Inventory control | $0.75 per component || Utilities | $3.00 per sq. ft. |**Calculate total overhead assigned under ABC.**- **Total overhead assigned:** $80,300**What is the manufacturing cost per stairway under the proposed activity-based costing?** *(Round answer to 2 decimal places, e.g., 12.25.)*- **Total manufacturing cost per stairway:** $_____---### Explanation of Graphs and Diagrams#### Overhead Rate TableThe table lists various activities involved in the manufacturing process along with the corresponding overhead rates. Overhead rates are calculated per unit of the specific activity, such as per order for purchasing, per move for handling materials, and per D/L hour for production. Each rate is provided with a precise value rounded to two decimal places.#### Calculating Total OverheadThe calculated total overhead of $80,300 represents the aggregate overhead costs according to Activity-Based Costing (ABC). This figure combines the overheads of each individual activity to provide a comprehensive view of the costs incurred.---This guide aims to help students understand both traditional and activity-based costing methods in a manufacturing setup, highlighting how activity-based costing can provide a more detailed and accurate distribution of overhead costs.

Activity-based costing system is one of the costing systems in which overhead costs are allocated or…

Oriole 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 2025 are as follows. Overhead Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Total budgeted overhead costs Activity Cost Pools Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities. Direct materials Direct labor Machine hours Direct labor hours Number of purchase orders For the last 4 years, Oriole Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2025, 100,000 machine hours are budgeted. Number of material moves Number of machine setups. Number of inspections (a) Jeremy Nolan, owner-manager of Oriole 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. Number of components Number of square feet occupied Your answer is correct. $104,100 $113,000 16,000 5,500 60 Predetermined overhead rate $ 800 100 Amount 450 $75,000 82,000 220,000 105,000 16.000 108,000 8,000 126,000 270,000 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. $986,000 Cost Drivers Number of orders Number of moves Direct labor hours. Number of setups Number of inspections Number of components Square feet occupied Estimated Use of Cost Drivers 9.86 600 8,000 per machine hour 100,000 1,250 6,000 168,000 Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.) 90,000