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 mode is a high-volume (54,000 units), ha 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 P Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000 10,200)]. Expected annual manufacturing overhead is $1,515,064. Thus,t predetermined overhead rate is s 15.73 or ($1,515,064 ÷ 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 $1 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 Expected Use of Cost Drivers Cost Pools Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead Home Commercial Receiving Forming Assembling Testing Painting Packing and shipping $67,000 143,500 368,900 56,100 42,064 837,500 $1,515,064 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 120,000 8,000 52,000 10,000 1,578 120,000 S,258 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

Answer 1

		Home		Commercial
		Model		model
total unit cost		61.10		69.10	answer
materials		18.50		26.50
direct labor		19.00		19.00
overhead (15.73*1.5)		23.60		23.60
total unit cost		61.10		69.10
(please check direct labor cost per unit since it has been cut off and make changes if different)
		Estimated	expected	activity based overhead
Activity cost pool		overhead	drivers	rate
Receiving		67,000	335,000	0.2	per pound
Forming		143,500	35,000	4.1	per machine hour
Assembling		368,900	217,000	1.7	per part
Testing		56,100	25,500	2.2	per test
Painting		42,064	5,258	8	per gallon
packing & shipping		837,500	335,000	2.5	per pound
		1,515,064
		Home Model			Commercial model
Activity cost pool		expected use	oh rate	cost assigned	expected use	oh rate	cost assigned
Receiving		215,000	0.2	43000	120,000	0.2	24000
Forming		27,000	4.1	110700	8000	4.1	32800
Assembling		165,000	1.7	280500	52000	1.7	88400
Testing		15,500	2.2	34100	10,000	2.2	22000
Painting		3,680	8	29440	1,578	8	12624
packing & shipping		215,000	2.5	537500	120,000	2.5	300000
total costs assigned				1035240			479824
units produced				54,000			10,200
overhead cost per unit				19.17			47.04
			home	Commercial
total cost per unit			56.67	92.54
Activity
Receiving			non value added
Forming			value added
Assembling			value added
Testing			non value added
Painting			value added
packing & shipping			value added