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Crane Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: ( 1 ) a home fire extinguisher and ( 2 )
Crane Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: a home fire extinguisher and a commercial fire extinguisher. The home model is a highvolume units halfgallon cylinder that holds pounds of multipurpose dry chemical at PSI. The commercial model is a lowvolume units twogallon cylinder that holds pounds of multipurpose dry chemical at PSI. Both products require hours of direct labor for completion. Therefore, total annual direct labor hours are or hours x Estimated annual manufacturing overhead is $ Thus, the predetermined overhead rate is $ or $ per direct labor hour. The direct materials cost per unit is $ for the home model and $ for the commercial model. The direct labor cost is $ 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.
Use of
Drivers by Product
Activity Cost Pools
Cost Drivers
Estimated Overhead
Estimated Use of
Receiving
Pounds
$
Cost Drivers
Home
Commercial
Forming
Machine hours
Assembling
Number of parts
Testing
Painting
Number of tests
Gallons
Packing and shipping
Pounds
$
Under traditional product costing, compute the total unit cost of each product. Round answers to decimal places, eg
Home Model
Prepare a schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. Round overhead cost per unit to decimal places, eg and cost assigned to decimal places, eg
Activity
Cost Pool
Receiving
Use of Drivers by Product
Home Model
ActivityBased
Overhead Rates
Cost Assigned
Use ol by P
Forming
Assembling
Testing
Painting
Packing and shipping
Total
COStS
assigned a
Units produced
b
Overhead cost per unit a
b
e Textbook and MediaCommercial Model Compute the total cost per unit for each product under ABC. Round answers to decimal places, eg
Home Model
Commercial Model
Total cost per unit Classify each of the activities as a valueadded activity or a nonvalueadded activity.
Activity
Receiving
Forming
Assembling
Testing
Painting
Packing and shipping
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