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Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a...

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 $1,582,000. Thus, the predetermined overhead rate is $16.43 or ($1,582,000 ÷ 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

Activity Cost Pools

Cost Drivers

Estimated Overhead

Expected Use of
Cost Drivers

Home

Commercial

Receiving Pounds

$88,500

335,000

215,000

120,000

Forming Machine hours

153,000

35,000

27,000

8,000

Assembling Number of parts

410,000

217,000

165,000

52,000

Testing Number of tests

53,000

25,500

15,500

10,000

Painting Gallons

57,500

5,258

3,680

1,578

Packing and shipping Pounds

820,000

335,000

215,000

120,000

$1,582,000

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

Expected
Use of Cost Drivers

Activity-Based
Overhead Rate

Receiving

$enter a dollar amount

enter an amount of pounds

Pounds

$enter a dollar amount per pound rounded to 2 decimal places

per pound
Forming

enter a dollar amount

enter a number of machine hours

Machine hours

$enter a dollar amount per machine hour rounded to 2 decimal places

per machine hour
Assembling

enter a dollar amount

enter a number of parts

Parts

$enter a dollar amount per part rounded to 2 decimal places

per part
Testing

enter a dollar amount

enter a number of tests

Tests

$enter a dollar amount per test rounded to 2 decimal places

per test
Painting

enter a dollar amount

enter an amount of gallons

Gallons

$enter a dollar amount per gallon rounded to 2 decimal places

per gallon
Packing and shipping enter a dollar amount

enter an amount of pounds

Pounds

$enter a dollar amount per pound rounded to 2 decimal places

per pound

$enter a total amount

0 0
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Answer #1

Schedule showing the computations of the activity-based overhead rates

Activity Cost Pool

Estimated Overheads $

Expected use of Cost Drivers

Activity Based Overhead Rate = Estimated Overheads $ / Expected use of Cost Drivers

Receiving

88,500.00

3,35,000 Pounds

$0.26 per pound

Forming

1,53,000.00

35,000 Machine Hours

$4.37 per machine hour

Assembling

4,10,000.00

2,17,000 Parts

$1.89 per part

Testing

53,000.00

25,500 Tests

$2.08 per test

Painting

57,500.00

5,258 Gallons

$10.94 per gallon

Packing and Shipping

8,20,000.00

3,35,000 Pounds

$2.45 per pound

15,82,000.00

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