Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fir
ID: 2573298 • Letter: C
Question
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 $1,584,280. Thus, the predetermined overhead rate is $16.45 or ($1,584,280 ÷ 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.
(a) 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 $ $
Explanation / Answer
Answer
Working
Home fire-extinguisher
Commercial fire extinguisher
A
Units
54000
10200
B=A x Material cost per unit
Direct material cost
[54000 x 18.5] 999000
[10200 x 26.52] 70300
C=A x $19
Direct labor cost
[54000 x 19] 1026000
]10200 x 19]193800
D=B+C
Total variable costs
2025000
464100
E = A x 1.5 hours
Direct labor hours
81000
15300
F
Overhead rate per direct labor hour
16.45
16.45
G=E x F
Manufacturing overhead allocated
1332450
251685
H=D + G
Total cost
3357450
715785
I = H / A
Cost per unit
62.175 or $62.18
70.175 or $70.18
Working
Home fire-extinguisher
Commercial fire extinguisher
A
Units
54000
10200
B=A x Material cost per unit
Direct material cost
[54000 x 18.5] 999000
[10200 x 26.52] 70300
C=A x $19
Direct labor cost
[54000 x 19] 1026000
]10200 x 19]193800
D=B+C
Total variable costs
2025000
464100
E = A x 1.5 hours
Direct labor hours
81000
15300
F
Overhead rate per direct labor hour
16.45
16.45
G=E x F
Manufacturing overhead allocated
1332450
251685
H=D + G
Total cost
3357450
715785
I = H / A
Cost per unit
62.175 or $62.18
70.175 or $70.18