Question
7 Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire
7
Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,577,000. Thus, the predetermined overhead rate is $16.38 or ($1,577,000 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The companys managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows:
Expected Use of Drivers by Product | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Activity Cost Pools | Cost Drivers | Estimated Overhead | Expected Use of Cost Drivers | Home | Commercial | |||||
Receiving | Pounds | $88,200 | 335,000 | 215,000 | 120,000 | |||||
Forming | Machine hours | 152,000 | 35,000 | 27,000 | 8,000 | |||||
Assembling | Number of parts | 410,000 | 217,000 | 165,000 | 52,000 | |||||
Testing | Number of tests | 53,000 | 25,500 | 15,500 | 10,000 | |||||
Painting | Gallons | 53,800 | 5,258 | 3,680 | 1,578 | |||||
Packing and shipping | Pounds | 820,000 | 335,000 | 215,000 | 120,000 | |||||
$1,577,000 |
Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.25.)
Home Model | Commercial Model |
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eTextbook and Media
Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rate to 2 decimal places, e.g. 12.25.)
Activity Cost Pool | Estimated Overhead | Expected Use of Cost Drivers | Activity-Based Overhead Rate | ||||||
---|---|---|---|---|---|---|---|---|---|
Receiving | |||||||||
Forming | |||||||||
Assembling | |||||||||
Testing | |||||||||
Painting | |||||||||
Packing and shipping | |||||||||
Prepare a schedule assigning each activitys overhead cost pool to each product based on the use of cost drivers. (Round overhead cost per unit to 2 decimal places, e.g. 12.25 and cost assigned to 0 decimal places, e.g. 2,500.)
Home Model | Commercial Model | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Activity Cost Pool | Expected Use of Drivers | Activity-Based Overhead Rates | Cost Assigned | Expected Use of Drivers | Activity-Based Overhead Rates | Cost Assigned | ||||||
Receiving | ||||||||||||
Forming | ||||||||||||
Assembling | ||||||||||||
Testing | ||||||||||||
Painting | ||||||||||||
Packing and shipping | ||||||||||||
Total costs assigned (a) | ||||||||||||
Units produced (b) | ||||||||||||
Overhead cost per unit [(a) (b)] |
Compute the total cost per unit for each product under ABC. (Round answer to 2 decimal places, e.g. 12.25.)
Home Model | Commercial Model | |||
---|---|---|---|---|
Total cost per unit | $enter a dollar amount rounded to 2 decimal places | $enter a dollar amount rounded to 2 decimal places |
Classify each of the activities as a value-added activity or a nonvalue-added activity.
Activity | ||
---|---|---|
Receiving | ||
Forming | ||
Assembling | ||
Testing | ||
Painting | ||
Packing and shipping |
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