Question

Problem 18-1A 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 x (54,000 10,200)]. Expected annual manufacturing overhead is $1,550,464. Thus, the predetermined overhead rate is S 16.10 or ($1,550,464 ÷96,300) per direct labor hour. The direct mater als 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 cemparnys manspensidentie ders and acmiaed veead we Expected Use of Drivers by Product Expected Use of Cost Drivers Activity Cost PoolsCost Drivers Receiving Forming Estimated Overhead Commercial 120,000 8,000 52,000 10,000 1,578 120,000 Home Pounds Machine hours Number of perts Number of tests Gallons Pounds $93,800 147,000 368,900 61,200 42,064 837.500 $1,550,464 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 S,2583,680 335,000 215,000 Testing Painting Packing and shipping Under tradtional 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

ABC O/H RATE:
Activity	Esti O/H	Exp. Cost Drivers	Activity Based o/h rate
Receiving	93800	335000	0.28	per pound
Forming	147000	35000	4.2	per MH
Assembling	368900	217000	1.7	per part
Testing	61200	25500	2.4	per test
Painting	42064	5258	8	per gallon
Packing and Shipping	837500	335000	2.5	per pound
TOTAL O/H	1550464
ABC O/H ASSIGNED:	Home Model			Commercial Model
Activity	Exp. Use of Driver	Activity Based o/h rate	Cost Assigned	Exp. Use of Driver	Activity Based o/h rate	Cost Assigned
Receiving	215000	0.28	60200	120000	0.28	33600
Forming	27000	4.2	113400	8000	4.2	33600
Assembling	165000	1.7	280500	52000	1.7	88400
Testing	15500	2.4	37200	10000	2.4	24000
Painting	3680	8	29440	1578	8	12624
Packing and Shipping	215000	2.5	537500	120000	2.5	300000
Costs assigned(a)			1058240			492224
Units produced (b)			54000			10200
Overhead cost per unit(a/b)			19.60			48.26
TOTAL COST PER UNIT:	HOME MODEL	COMMERCIAL MODEL
DM	18.5	26.5
DL	19	19
OVERHEAD	19.6	48.26
TOTAL COST PER UNIT	57.1	93.76
CLASSIFICATION:
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	NON-VALUE ADDED