Question

FireOut Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) e horne fire extinguisher and (2) a cornmercial fire extinguisher. The home model is a high-volumne (58,000 units), half-litre cylinder that holds 2.5 kilograms of multi-purpose cry chemical at 4B0 PSI (pounds per square inch). The commercial madel is a low-volume (16,780 unit), two-litre cylinder that halds 10 kilograms of multi-purpose dry chemical at 390 PSI. Both products require 1.25 hours af direct labour for completion. Therefore, total annual direct labour hours are 93,475 or 1.25 hrs. x 158,00 16,780). Estimated annual manufacturing overhead is $1,495,600. Thus, the predetermined overhead rate is $16.00 or 1,495,500 : 93,475) per direct labour hour. The direct materials cost per unit is $18.46 for the home model and $27.10 for the commercial model. The direct labour cost is $18.80 per unit for both the home and commercial models The company's managers Identified six activity cost pools and related cost drivers, and estimated averhead by cost pool as follows: Estimated Estimated Use Overhead of Cost Drivers Estimated Use of Drivers by Product Activity Cost Pools Cost Drivers Receiving Farming lissernbling Testing Painting Packing and shipping Kilograms Machine hours Number of parts Number of tests Litres Kilograms $67,600 150,500 391,200 51,300 54,600 777,100 $1,495,600 Home Commercial 338,000 216,000 122,000 35,000 27.000 9,000 219,000 166,000 53,000 27,000 17,000 10,000 6,000 4,000 2,000 338,000 216,000 122.000 Under traditional product costing, calculate the total unit cost of each product. Prepare a simple comparative schedule of the individual costs by product. (Round answers to 2 decimal places, e.g. 15.25.) Products Manufacturing Costs Home Model Commercial Model Direct materials Direct labour Overhead Tatal unit cost Under ABC, prepare a schedule showing the calculations of the activity-based averhead rates (per cust driver). (Round rate per cost driver to 2 decimal places, e.g. 15.25 and other answers to O decimal places e.g. 1525.) Cost Pool MOH Usage Rate Cost Drivers Receiving per kilograrn Forming per machine hr. Assembly per part Testing per test Painting per litre Packing and shippings per kilograrn

Answer 1

			Home Model	Commercial
	A	Direct Materials	$18.46	$27.10
	B	Direct Labor	$18.80	$18.80
	C=16*1.25	Overhead	$20.00	$20.00
	D=A+B+C	Total Unit Cost	$57.26	$65.90
			A	B	C=A/B
			Estimated MOH	Estimated Usage	Rate	Cost Driver
		Receiving	$67,600	338000	$0.20	Per Kilogram
		Forming	$150,500	35000	$4.30	per Machine hr
		Assembly	$394,200	219000	$1.80	per part
		Testing	$51,300	27000	$1.90	per test
		Painting	$54,600	6000	$9.10	per liter
		Packaging & Shipping	$777,400	338000	$2.30	per Kilogram
			$1,495,600
		Activity based Overhead applied
				Home Model		Commercial Model
			Rate(A)	Usage(B)	Allocation(A*B)	Usage,(.C)	Allocation(A*C)
		Receiving-Kilogram	$0.20	216000	$43,200	122000	$24,400
		Forming-Machine hour	$4.30	27000	$116,100	8000	$34,400
		Assembly-part	$1.80	166000	$298,800	53000	$95,400
		Testing-test	$1.90	17000	$32,300	10000	$19,000
		Painting-liter	$9.10	4000	$36,400	2000	$18,200
		Packaging & Shipping-Kilogram	$2.30	216000	$496,800	122000	$280,600
			D	TOTAL	$1,023,600		$472,000	$1,495,600
			E	UNITS	58000		16780
			F=D/E	Cost per unit	$17.65		$28.13
			Home	Commercial
		Per Unit Cost	$17.65	$28.13
		Receiving	Non Value Added
		Forming	Value Added
		Assembly	Value Added
		Testing	Non Value Added
		Painting	Value Added
		Packaging & Shipping	Value Added