Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver. It applies all indirect costs according to a predetermined rate based on direct labor-hours. A consultant recently suggested that the company switch to an activity-based costing system and prepared the following cost estimates for year 2 for the recommended cost drivers.

Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Activity

Processing orders Number of orders $48,000 200 orders

Setting up production Number of production runs 240,000 120 runs

Handling materials Pounds of materials used 220,000 100,000 pounds

Machine depreciation Machine-hours 260,000 13,000 hours

Performing quality Number of inspections 44,450 35 inspections

Packing Number of units 115,000 460,000 units

Total estimated cost $927,450

In addition, management estimated 7,600 direct labor-hours for year 2.

Assume that the following cost driver volumes occurred in January, year 2.

Institutional Standard Silver

Number of units produced 57,000 27,000 10,000

Direct materials costs $42,000 $26,000 13,000

Direct labor-hours 420 410 640

Number of orders 14 10 7

Number of production runs 3 3 5

Pounds of material 15,000 6,000 3,000

Machine-hours 570 160 100

Number of inspections 3 2 3

Units shipped 57,000 27,000 10,000

Actual labor costs were $14 per hour.

Compute the production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirementa. (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.) List an amount for the specific indirect costs below for institutional, standard, and silver.

Indirect Costs :

Processing Orders

Setting up production

Handling Materials

Using Machines

Performing Quality Work