Problem 17-1A
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 $1,570,800. Thus, the predetermined overhead rate is $16.31 or ($1,570,800 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: Expected Use of Drivers by Product Expected Use of Cost Drivers Activity Cost Pools Receiving Forming Assembling Testing Painting Packing and shipping Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead $87,700 148,000 409,000 46,000 53,100 827,000 $1,570,800 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 Home Commercial 120,000 8,000 52,000 10,000 1,578 120,000 5,258 Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g 12.25.) Home Model Commercial Model Total unit cost 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 Receiving Forming Assembling Testing Painting Packing and shipping Estimated Overhead Expected Use of Cost Drivers Activity-Based Overhead Rate Pounds per pound per machine hour per part per test per gallon per pound Machine hours Parts Tests Gallons Pounds 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, e.g. 12.25 and cost assigned to 0 decimal places, e.g. 2,500.) Expected Use of Drivers Home Model Activity- Based Overhead Rates Expected Use of Drivers Commercial Model Activity- Based Overhead Rates Cost Assigned Cost Assigned Activity Cost Pool Receiving Forming Assembling Testing Painting Packing and shipping Total costs assigned Units produced (b) Overhead cost per unit [(a) (b)] Compute the total cost per unit for each product under ABC. (Round answer to 2 decimal places, e.g. 12.25.) Home Model Commercial Model Total cost per unit s Classify each of the activities as a value-added activity or a non-value-added activity Receiving Forming Assembling Painting Packing and shipping
