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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.
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)). Estimated annual manufacturing overhead is $1,561,090. Thus, the predetermined overhead rate is $16.21 or ($1.561,090 +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 company's managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows Estimated Use of Drivers by Product Estimated Use of Cost Drivers Cost Drivers Estimated Overhead Home Pounds $83,750 Activity Cost Pools Receiving Forming Assembling 335,000 35,000 215,000 27,000 Commercial 120,000 8.000 52.000 149.100 Machine hours Number of parts 403,620 217,000 165,000 47.940 Number of tests Testing 25.500 15,500 10.000 Gallons 52,580 5.258 Painting 3,680 1.578 Activity Cost Pool Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rate Receiving $ Pounds pc Forming Machine hours $ pe m hc Assembling Parts $ pa Testing Tests $ pe Painting Gallons $ Ra p4 Packing and shipping Pounds $ pc $ 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)). Estimated annual manufacturing overhead is $1,561,090. Thus, the predetermined overhead rate is $16.21 or ($1.561,090 +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 company's managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows Estimated Use of Drivers by Product Estimated Use of Cost Drivers Cost Drivers Estimated Overhead Home Pounds $83,750 Activity Cost Pools Receiving Forming Assembling 335,000 35,000 215,000 27,000 Commercial 120,000 8.000 52.000 149.100 Machine hours Number of parts 403,620 217,000 165,000 47.940 Number of tests Testing 25.500 15,500 10.000 Gallons 52,580 5.258 Painting 3,680 1.578 Activity Cost Pool Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rate Receiving $ Pounds pc Forming Machine hours $ pe m hc Assembling Parts $ pa Testing Tests $ pe Painting Gallons $ Ra p4 Packing and shipping Pounds $ pc $
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