Question

Question 1 FireOut 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 (48,000 units), half-litre cylinder that holds 2.5 kilograms of multi-purpose dry chemical at 480 PSI (pounds per square inch). The commercial model is a low-volume (7,300 units), two-litre cylinder that holds 10 kilograms of multi-purpose dry chemical at 390 PSI. Both products require 1.50 hours of direct labour for completion. Therefore, total annual direct labour hours are 82,950 or (1.50 hrs. * (48,000 + 7,300)). Estimated annual manufacturing overhead is $1,493,100. Thus, the predetermined overhead rate is $18.00 or ($1,493,100 = 82,950) per direct labour hour. The direct materials cost per unit is $18.16 for the home model and $26.06 for the commercial model. The direct labour cost is $19.20 per unit for both the home and commercial models. The company's managers identified six activity cost pools and related cost drivers, and estimated overhead by cost pool as follows: Activity Cost Pools Cost Drivers Receiving Kilograms Forming Machine hours Assembling Number of parts Testing Number of tests Painting Litres Packing and shipping Kilograms Estimated Estimated Use Estimated Use Overhead of Cost Drivers of Drivers by Product Home Commercial $67,600 338,000 216,000 122,000 150,500 35,000 27,000 8,000 392,400 218,000 165,000 53,000 51,300 27,000 16,000 11,000 53,900 7,000 4,000 3,000 777,400 338,000 216,000 122,000 $1,493,100

Answer 1

solution: Parta: Home 18.16 Direct material cost per unit Direct labor cost per unit Overhead=18*1.5 Total unit cost 19.20 27.00 64.36 commercial 26.06 19.20 27.00 72.26