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)]. Estimated 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.

The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

								Estimated Use of Drivers by Product
Activity Cost Pools		Cost Drivers		Estimated Overhead		Estimated Use of Cost Drivers		Home		Commercial
Receiving		Pounds		$80,400		335,000		215,000		120,000
Forming		Machine hours		150,500		35,000		27,000		8,000
Assembling		Number of parts		412,300		217,000		165,000		52,000
Testing		Number of tests		51,000		25,500		15,500		10,000
Painting		Gallons		52,580		5,258		3,680		1,578
Packing and shipping		Pounds		837,500		335,000		215,000		120,000
				$1,584,280

Part 1 Your Answer Correct Answer Your answer is correct. Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, ey. 12.50.) Commercial Model Home Model 62.18 Total unit cost $ $ 70.18 e Textbook and Media Solution Attempts: 3 of 3 used Part 2 Your answer is correct. Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rate to 2 decimal places, cg. 12.25.) Activity Cost Pool Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rate Receiving 80400 335000 Pounds per pound Forming 150500 35000 Machine hours $ per machine hour Assembling 412300 217000 Parts per part Testing 51000 25500 Tests per test Painting 52580 525 Gallons 10.00 per gallon Packing and shipping 837500 335000 Pounds $ 2.50 per pound $ 1584280 eTextbook and Media Attempts: 2 of 3 used Part 3 Prepare a schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Round overhead cost per unit to 2 decimal places, eg. 12.25 and cost assigned to O decimal places, eg. 2,500.) Home Model Commercial Model Estimated Use of Drivers Activity-Based Overhead Rates Estimated Use of Drivers Activity Cost Pool Cost Assigned Activity-Based Overhead Rates Cost Assigned Recelvine Forming Assembling Testing Painting Packing and shipping Total costs assigned (a) Units produced (b) Overhead cost per unit [(a) (b)]

Answer 1

	Home Model			Commercial Model
Activity cost pool	Estimated use of drivers	Activity-based overhead rates	Cost assigned	Estimated use of drivers	Activity-based overhead rates	Cost assigned
Receiving	215,000	$0.24	$51,600	120,000	$0.24	$28,800
Forming	27,000	4.30	116,100	8,000	4.30	34,400
Assembling	165,000	1.90	313,500	52,000	1.90	98,800
Testing	15,500	2	31,000	10,000	2	20,000
Painting	3,680	10	36,800	1,578	10	15,780
Packing and shipping	215,000	2.50	537,500	120,000	2.50	300,000
Total costs assigned (a)			$1,086,500			$497,780
Units produced (b)			54,000			10,200
Overhead cost per unit			$20.12			$48.80