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

 

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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 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

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a Compute the Predetermined Rate for Year 2 Using Direct LaborHours as Allocation Base Predetermined Rate Estimated Total Overhead Costs Estimated Tot... View the full answer