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 PoolsAmountPurchasing $57,000Handling materials 87,200 82,000Production (cutting, milling, finishing) 230,000 210,000Setting up machines 91,250 85,000Inspecting 108,000 90,000Inventory control (raw materials and finished goods) 134,400 126,000Utilities 360,000 180,000Total 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 poolsCost DriversExpectedUse ofCost DriversPurchasing Number of orders 600Handling materials Number of moves 8,000Production (cutting, milling, finishing) Direct labor hours 100,000Setting up machines Number of setups 1,250Inspecting Number of inspections 6,000Inventory control (raw materials and finished goods) Number of components 168,000Utilities Square feet occupied 90,000David 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 $104,300 103,600Direct labo r $112,200 112,000Machine hours 15,400 14,500Direct labor hours 5,600 5,000Number of purchase orders 60Number of material moves 800Number of machine setups 100Number of inspections 450Number of components 16,000Number of square feet occupied 8,000Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 2.25.)$ 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.)
