Question

CALCULATOR STANDARD VIEW INTE VERSIO N EET Problem 17-01A - Combat Fire, Inc. manufactures steel cylinders and notes for two models of fire extinguishers: (1) a home fire extinguisher and (2) commerce extinguisher. The home made 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-longinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, to al direct labor hours are 96,300 or 11.5 hours x (54,000 + 10, 2001 Estimated annual manufacturing overhead is $1,583,096. Thus, the predetermined overhead rate is $16.44 or (51,583,096 +96.300) per direct labor hour. The Grect materie cost per untis $18.50 for the home model and $26.50 for the commercial model. The direct labor costs $19 per un 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 Receiving Forming Assembling Testing Painting Packing and shipping Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead $50,400 145,950 414, 470 55,080 63,096 824,100 $1.583.096 Estimated Use of Cost Drivers 335,000 35,000 217,000 25,500 5,258 335,000 Home 215.000 27.000 165,000 15.500 3,680 215,000 Commercial 120,000 8,000 52,000 10,000 1,578 120,000 Your answer is incorrect. Try again decimal places, e.. 12.50) Under traditional product costing, compute the total unit cost of each product. (Round answers to Home Model Commercial Model 124.32 Total unit cost

Answer 1

Solution 1:

Computation of unit cost of each product - Traditional costing - Combat fire Inc.
Particulars	Home Fire Extinguisher	Commercial Fire Extinguisher
Direct material	$18.50	$26.50
Direct labor	$19.00	$19.00
Manufacturing overhead	$24.66	$24.66
Unit Product Cost	$62.16	$70.16

Solution 2:

Determination of activity rate for each activity
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate
					Receiving	$80,400.00	Pounds	335000	$0.24
Forming	$145,950.00	Machine hours	35000	$4.17
Assembling	$414,470.00	Nos of parts	217000	$1.91
Testing	$55,080.00	Nos of tests	25500	$2.16
Painting	$63,096.00	Gallon	5258	$12.00
Packing and shipping	$824,100.00	Pounds	335000	$2.46
Total	$1,583,096.00

solution 3:

Allocation of overhead and computation of overhead cost per unit
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate	Home		Commercial
					Usage	Allocated Costs	Usage	Allocated Costs
Receiving	$80,400.00	Pounds	335000	$0.24	215000	$51,600	120000	$28,800
Forming	$145,950.00	Machine hours	35000	$4.17	27000	$112,590	8000	$33,360
Assembling	$414,470.00	Nos of parts	217000	$1.91	165000	$315,150	52000	$99,320
Testing	$55,080.00	Nos of tests	25500	$2.16	15500	$33,480	10000	$21,600
Painting	$63,096.00	Gallon	5258	$12.00	3680	$44,160	1578	$18,936
Packing and shipping	$824,100.00	Pounds	33 4:5000	$2.46	215000	$528,900	120000	$295,200
Total	$1,583,096.00					$1,085,880		$497,216
Nos of units						54000		10200
Overhead cost per unit						$20.11		$48.75

solution 4:

Computation of unit cost of each product - Activity Based costing - Combat Fire Inc.
Particulars	Home Fire Extinguisher	Commercial Fire Extinguisher
Direct material	$18.50	$26.50
Direct labor	$19.00	$19.00
Manufacturing overhead	$20.11	$48.75
Unit Product Cost	$57.61	$94.25

Solution 5:

Activity	Value Added / Non Value Added
Receiving	Non Value Added
Forming	Value Added
Assembling	Value Added
Testing	Non Value Added
Painting	Value Added
Packing and shipping	Value Added