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:
Activity Centers Cost Drivers Rate per
Cost Driver Unit
Materials handling Pounds of material handled $ 15 per pound
Quality inspections Number of inspections $ 220 per inspection
Machine setups Number of machine setups $ 3,000 per setup
Running machines Number of machine-hours $ 20.00 per hour
Direct materials costs were $310,000 and direct labor costs were $167,000 during July, when the Fabrication Department handled 3,900 pounds of materials, made 730 inspections, had 40 setups, and ran the machines for 16,000 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.