Skaros stairs co. of moore designs

Skaros Stairs Co. of Moore designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2011 are as follows. Overhead Cost Pools Amount Purchasing $57,000 Handling materials 87,200 82,000 Production (cutting, milling, finishing) 230,000 210,000 Setting up machines 91,250 85,000 Inspecting 108,000 90,000 Inventory control (raw materials and finished goods) 134,400 126,000 Utilities 360,000 180,000 Total budget overhead costs $1,067,850 830,000 For the last 4 years, Skaros Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2011, 100,000 machine hours are budgeted. Anthony Morse, owner-manager of Skaros Stairs Co., recently directed his accountant, Neal Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Anthony Morse’s request, Neal and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools Cost Drivers Expected Use of Cost Drivers Purchasing Number of orders 600 Handling materials Number of moves 8,000 Production (cutting, milling, finishing) Direct labor hours 100,000 Setting up machines Number of setups 1,250 Inspecting Number of inspections 6,000 Inventory control (raw materials and finished goods) Number of components 168,000 Utilities Square feet occupied 90,000 David Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At David’s request, Neal prepares cost estimates for producing components for 280 stairs so David can submit a contract price per stair to Community Builders. He accumulates the following data for the production of 280 stairways. Direct materials $104,300 103,600 Direct labo r $112,200 112,000 Machine hours 15,400 14,500 Direct labor hours 5,600 5,000 Number of purchase orders 60 Number of material moves 800 Number of machine setups 100 Number of inspections 450 Number of components 16,000 Number of square feet occupied 8,000 Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 2.25.) $ Per machine hour. What is the manufacturing cost per stairway under traditional costing? (Use rounded amount from part (a). Round answer to 2 decimal places, e.g. 10.50.) What is the manufacturing cost per stairway under the proposed activity-based costing? (Round activity-based overhead rates to 2 decimal places, e.g. 10.50. Round final answer to 2 decimal places, 10.50.)

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