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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: Rate per Cost Driver Unit $ Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled Number of inspections Number of machine setups Number of machine-hours 36 per pound $ 450 per inspection $5,400 per setup $ 45 per hour Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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.

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: Rate per Cost Driver Unit $ Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled Number of inspections Number of machine setups Number of machine-hours 36 per pound $ 450 per inspection $5,400 per setup $ 45 per hour Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: Rate per Cost Driver Unit Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled $ 36 per pound Number of inspections Number of machine setups Number of machine-hours 450 per inspection $5,400 per setup $ $ 45 per hour Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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.
Transcribed Image Text: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: Rate per Cost Driver Unit Activity Centers Materials handling Quality inspections Machine setups Running machines Cost Drivers Pounds of material handled $ 36 per pound Number of inspections Number of machine setups Number of machine-hours 450 per inspection $5,400 per setup $ $ 45 per hour Direct materials costs were $600,000 and direct labor costs were $300,000 during July, when the Fabrication Department handled 3,000 pounds of materials, made 500 inspections, had 25 setups, and ran the machines for 10,000 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.
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