Question
Sheridan Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire
Sheridan 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 x (54,000+10,200)]. Estimated annual manufacturing overhead is $1,577,770. Thus, the predetermined overhead rate is $16.38 or ($1,577,770 + 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. The company's managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows. Use of Drivers by Product Activity Cost Pools Receiving Cost Drivers Pounds Estimated Overhead Estimated Use of Cost Drivers Home Commercial $80,400 335,000 215,000 120,000 Forming Machine hours 150,850 35,000 27,000 8,000 Assembling Number of parts 414,470 217,000 165,000 52,000 Testing Number of tests 52,020 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215,000 120,000 $1,577,770 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 Estimated Cost Pool Overhead Receiving $ Forming Assembling Testing Estimated Use of Cost Drivers Pounds $ Activity-Based Overhead Rate per poun per Machine $ mach hours hour Parts $ per part Tests $ pert Gallons $ per gallo Painting Packing and Pounds $ per poun shipping
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