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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

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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