Question 1

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)]. Estimated annual manufacturing overhead is $1,567,870. Thus, the predetermined overhead rate is $16.28 or ($1,567,870 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.

								Estimated Use of Drivers by Product
Activity Cost Pools		Cost Drivers		Estimated Overhead		Estimated Use of Cost Drivers		Home		Commercial
Receiving		Pounds		$83,750		335,000		215,000		120,000
Forming		Machine hours		152,950		35,000		27,000		8,000
Assembling		Number of parts		401,450		217,000		165,000		52,000
Testing		Number of tests		53,040		25,500		15,500		10,000
Painting		Gallons		52,580		5,258		3,680		1,578
Packing and shipping		Pounds		824,100		335,000		215,000		120,000
				$1,567,870

(a)

	Your answer is correct.

Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.50.)

		Home Model		Commercial Model
Total unit cost		$		$

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(b)

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		Estimated 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
		$