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 horme 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 s 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 ]. Expected annual manufacturing overhead is $1,567,400·Thus the predetermined overhead rate is $16.28。 ($1,567,400 ÷ 96 300 per direct labor hour. The direct materials cost per unit is $18.50 or the home model and S26.50 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 Expected Use of Drivers by Product Expected Use of Cost Drivers Activity Cost Pools Receiving Forming Cost Drivers Estimated Overhead Home Commercial Machine hours Number of parts Number of tests Gallons Pounds S85,500 153,000 410,000 45,000 53,900 820,000 $1,567,400 335,000 215,000 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 Testing Painting Packing and shipping 5,258 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

1	Traditional costing	Based on direct labor hours
	Total manufacturing cost	1567400
	Total direct labor hours	96300
	Predetermined OH rate	16.28
		Home model	Commercial model
	Predetermined OH rate	16.28	16.28
	Direct Labor hours	81000	15300
	Manufacturing overheads	1318373.83	249026.17
	Number of units	54000	10200
	Unit cost	24.41	24.41
	Particulars	Home model	Commercial model
	Direct material	18.5	26.5
	Direct labor	19	19
	Manufacturin overheads	24.41	24.41
	manufacturing cost per unit	61.91	69.91
2	ABC system	Estimated cost	Cost driver	Cost per driver
	Receiving	85500	335000	0.26
	Forming	153000	35000	4.37
	Assembly	410000	217000	1.89
	Testing	45000	25500	1.76
	Painting	53900	5258	10.25
	Packing and shipping	820000	335000	2.45
		1567400
	ABC system	Cost driver	Home model	Total cost
	Receiving	0.26	215000	54873
	Forming	4.37	27000	118029
	Assembly	1.89	165000	311751
	Testing	1.76	15500	27353
	Painting	10.25	3680	37724
	Packing and shipping	2.45	215000	526269
	Total overheads			1075998
	Number of units			54000
	Cost per unit			19.93
	ABC system	Cost driver	Commercial model	Total cost
	Receiving	0.26	120000	30627
	Forming	4.37	8000	34971
	Assembly	1.89	52000	98249
	Testing	1.76	10000	17647
	Painting	10.25	1578	16176
	Packing and shipping	2.45	120000	293731
	Total overheads			491402
	Number of units			10200
	Cost per unit			48.18
	Particulars	Home model	Commercial model
	Direct material	18.5	26.5
	Direct labor	19	19
	Manufacturin overheads	19.93	48.18
	manufacturing cost per unit	57.43	93.68