Problem 17-1A Combat Fire, Inc. manufactures steel cylinders and nozzles for two
ID: 2329640 • Letter: P
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 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)] 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 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 Home Commercial 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 $89,700 151,000 405,000 51,000 57,600 822,000 $1,576,300 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 120,000 8,000 52,000 10,000 1,578 120,000 5,258 Your answer is incorrect. Try agairn 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 62.05 70.05 LINK TO TEXT VIDEO: SIMILAR PROBLEM Your answer is incorrect. Try again. 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 Estimated Overhead Expected Use of Cost Drivers Activity-Based Overhead Rate 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 poundExplanation / Answer
Answers
Working
Home
Commercial
A
Direct Material
$ 18.50
$ 26.50
B
Direct Labor Cost
$ 19.00
$ 19.00
C
No. of hours taken per units
1.5
1.5
D
Predetermined overhead rate
$ 16.37
$ 16.37
E = C x D
Overheads per unit
$ 24.56
$ 24.56
F = A + B + E
Total Unit Cost
$ 62.06
$ 70.06
Overheads
Expected Use of Cost drivers
Activity Based overhead rate
Receiving
$ 89,700.00
335,000
pounds
$ 0.27
per pound
Forming
$ 151,000.00
35,000
machine hours
$ 4.31
per machine hour
Assembling
$ 405,000.00
217,000
Parts
$ 1.87
per part
Testing
$ 51,000.00
25,500
Tests
$ 2.00
per test
Painting
$ 57,600.00
5,258
Gallans
$ 10.95
per gallon
Packing & Shipping
$ 822,000.00
335,000
Pounds
$ 2.45
per pound
$ 1,576,300.00
Home Model
Commercial Model
Activity Cost Pool
Expected Use of drivers
Activity Based Overhead rates
Cost Assigned
Expected Use of drivers
Activity Based Overhead rates
Cost Assigned
Receiving
215,000
$ 0.27
$ 58,050
120,000
$ 0.27
$ 32,400
Forming
27,000
$ 4.31
$ 116,370
8,000
$ 4.31
$ 34,480
Assembling
165,000
$ 1.87
$ 308,550
52,000
$ 1.87
$ 97,240
Testing
15,500
$ 2.00
$ 31,000
10,000
$ 2.00
$ 20,000
Painting
3,680
$ 10.95
$ 40,296
1,578
$ 10.95
$ 17,279
Packing & Shipping
215,000
$ 2.45
$ 526,750
120,000
$ 2.45
$ 294,000
Total cost assigned
$ 1,081,016
$ 495,399
Units Produced
54,000
10,200
Overhead cost per unit
$ 20.02
$ 48.57
Home
Commercial
Direct Material
$ 18.50
$ 26.50
Direct Labor Cost
$ 19.00
$ 19.00
Overhead cost assigned as per ABC
$ 20.02
$ 48.57
Total cost per unit
$ 57.52
$ 94.07
Working
Home
Commercial
A
Direct Material
$ 18.50
$ 26.50
B
Direct Labor Cost
$ 19.00
$ 19.00
C
No. of hours taken per units
1.5
1.5
D
Predetermined overhead rate
$ 16.37
$ 16.37
E = C x D
Overheads per unit
$ 24.56
$ 24.56
F = A + B + E
Total Unit Cost
$ 62.06
$ 70.06