Question
Problem 17-1A Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial
Problem 17-1A
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 $1,576,300. Thus, the predetermined overhead rate is $16.37 or ($1,576,300 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 | $89,700 | 335,000 | 215,000 | 120,000 | |||||
Forming | Machine hours | 151,000 | 35,000 | 27,000 | 8,000 | |||||
Assembling | Number of parts | 405,000 | 217,000 | 165,000 | 52,000 | |||||
Testing | Number of tests | 51,000 | 25,500 | 15,500 | 10,000 | |||||
Painting | Gallons | 57,600 | 5,258 | 3,680 | 1,578 | |||||
Packing and shipping | Pounds | 822,000 | 335,000 | 215,000 | 120,000 | |||||
$1,576,300 |
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 | $ | Pounds | $ | per pound | |||||
Forming | Machine hours | $ | per machine hour | ||||||
Assembling | Parts | $ | per part | ||||||
Testing | Tests | $ | per test | ||||||
Painting | Gallons | $ | per gallon | ||||||
Packing and shipping | Pounds | $ | per pound | ||||||
$ |
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