Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all…

Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all…

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Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs
according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company
switch to an activity-based costing system. The controller’s staff prepared the following cost estimates for next year (year 2) for the
recommended cost drivers.
Activity
Purchasing material
Receiving material
Setting up equipment
Machine depreciation and maintenance
Ensuring regulatory compliance
Shipping
Total estimated cost
Number of units produced
Direct labor-hours
Recommended Cost Driver
Number of purchase orders
Direct materials cost
Number of production runs
Machine-hours
In addition, management estimated 45,000 direct labor-hours for year 2.
Assume that the following cost-driver volumes occurred in January, year 2:
Platinum.
3,000
400
3
$ 37,500
5
100
3
3,000
Silver
32,000
2,000
7
$ 97,500
Number of inspections
Number of units shipped
Gold
10,000
1,200
6
Number of purchase orders
Direct materials costs
$ 60,000
Number of production runs
Machine-hours
2
700
0
32,000
3
175
2
Number of inspections
Units shipped
10,000
Labor costs are based on the contractual rate of $25 per hour.
Estimated Cost
$ 114,000
216,000
210,000
72,000
421, 200
1,036,800
$ 2,070,000
Estimated Cost Driver Activity
240 purchase orders
$ 2,700,000
120 runs
14,400 hours
54 inspections
576,000 units Required:
a. Compute the predetermined rate for year 2 for use in the current product-costing system using direct labor-hours as the allocation
base.
b. Compute the per-unit production costs for each model for January using direct labor-hours as the allocation base and the
predetermined rate computed in requirement (a).
c. Compute the predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units
prepared by the controller’s staff to be used in an ABC system.
d. Compute the per unit production costs for each product for January using the cost drivers recommended by the consultant and the
predetermined rates computed in requirement (c). (Note: Do not assume that total overhead applied to products in January will be
the same for activity-based costing as it was for the labor-hour-based allocation.)
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C Required D
Compute the predetermined rate for year 2 for use in the current product-costing system using direct labor-hours as the
allocation base.
Predetermined rate per direct labor-hour

Expert Answer:

Answer rating: 100% (QA)

a Compute the Predetermined Rate for Year 2 Using Direct Labor Hours as Allocation Base Predetermined Rate Estimated Total Overhead Costs Estimated To
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