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.