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Marigold, Inc, manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The
Marigold, 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 tabor hours are 96,300 or [1.5 hours (54,000 + 10.200)). Estimated annual manufacturing overhead is $1,575,500. Thus, the predetermined overhead rate is $16.36 or ($1,575,500 - 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 Commercial Activity Cost Pools Receiving Home 215,000 Pounds $87.100 335,000 120,000 8,000 Forming 151,900 35,000 27,000 Assembling Machine hours Number of parts Number of tests 410,130 217,000 52.000 165,000 Testing 53,040 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 Pounds Packing and shipping 820.750 335.000 215,000 120,000 $1.575,500 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 2 decimal places, eg. 12.25 and cost assigned to O decimal places, eg. 2,500.) Activity Cost Pool Home Model Activity-Based Overhead Rates Estimated Use of Drivers Estimate Driv Cost Assigned Receiving 215000 $ Forming 27000 $ Assembling 165000 $ Testing 15500 $ Painting 3680 $ Packing and shipping 215000 $ 102 Total costs assigned (a) Units Estimated Use of Drivers Activity-Based Overhead Rates Cost Assigned Cost Assigned $ $ $ $ $ $ 10 100
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