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:

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. Use the accounts Materials Inventory, Wages Payable, Work-in-Process Inventory, Finished Goods Inventory, and four overhead applied accounts.

Transcribed Image Text:

Rate per Cost Driver Unit Activity Centers Cost Drivers Number of $450 per inspection Machine setups....... . . . . Number of machine setups $%5,400 per setup Running machines.. . . . . . . . .. Number of machine-hours $45 per hour