Answered step by step
Verified Expert Solution
Question
1 Approved Answer
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The
FireOut, 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-litre cylinder that holds 2.50 kilograms of multi-purpose dry chemical at 480 PSI (pounds per square inch). The commercial model is a low-volume (10,200 units), two-litre cylinder that holds 10 kilograms of multi-purpose dry chemical at 390 PSI. Both products require 1.50 hours of direct labour for completion. Therefore, total annual direct labour hours are 96,300 or (1.50 hrs. (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,502,280. Thus, the predetermined overhead rate is $15.60 or ($1,502,280 = 96,300) per direct labour hour. The direct materials cost per unit is $18.42 for the home model and $27.16 for the commercial model. The direct labour cost is $18.20 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: Activity Cost Pools Cost Drivers Receiving Kilograms Forming Machine hours Assembling Number of parts Testing Number of tests Painting Litres Packing and shipping Kilograms Estimated Expected Use Expected Use Overhead of Cost Drivers of Drivers by Product Home Commercial $70,560 339,400 217,000 122,400 152,800 35,200 27,000 8,200 393,400 219,800 167,000 52,800 52,900 26,800 16,400 10,400 53,720 5,700 4,100 1,600 778,900 339,400 217,000 122,400 $1,502,280 Under traditional product costing, calculate the total unit cost of each product. Prepare a simple comparative schedule of the individual costs by product. (Round answers to 2 decimal places, e.g. 15.25.) Products Commercial Model Home Model Manufacturing Costs Direct materials $ Direct labour Overhead Total unit cost Under ABC, prepare a schedule showing the calculations of the activity-based overhead rates (per cost driver). (Round rate per cost driver to 2 decimal places, e.g. 15.25 and other answers to o decimal places e.g. 1525.) Est. MOH Cost Cost Pool Est. Usage Rate Drivers Receiving per kilogram Forming per machine hr Assembly per part Testing per test Painting per litre Packing & shipping per kilogram Prepare a schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Round per unit cost to 2 decimal places, e.g. 15.25 and other answers to o decimal places e.g. 1525.) Home Commercial Activity-based overhead applied Receiving-kilograms Forming-machine hours Assembly-number of parts Testing-number of tests Painting-litres Packing and shipping-kilograms Total overhead applied Total units produced Per unit overhead cost Calculate the total cost per unit for each product under ABC. (Round answers to 2 decimal places, e.g. 15.25.) Home Commercial Per unit cost Classify each of the activities as a value-added activity or a non-value-added activity. Receiving Forming Assembling Testing Painting Packing and shipping
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started