Question

Show Attempt History Current Attempt in Progress 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 $1,577,000. Thus, the predetermined overhead rate is $16.38 or ($1,577,000+ 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 $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 Activity Cost Pools Cost Drivers Estimated Overhead Commercial Receiving Pounds $88,200 152,000 Forming Machine hours Expected Use of Cost Drivers Home 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 5,258 3,680 335,000 215,000 120,000 8,000 52,000 10,000 Assembling Number of parts 410,000 Testing Number of tests 53,000 53,800 Painting Gallons 1,578 Packing and shipping Pounds 120,000 820,000 $1,577,000

Answer 1

Schedule Showing computation of activity based overhead rates (per cost driver). Activity based overhead rate = Estimated Overhead / Expected use of cost driver Expected use of cost driver Activity based overhead rate Activity cost pool Estimated Overhead $ $ Receiving Forming Assembling Testing Painting Packaging & Shipping 88,200 152,000 410,000 53,000 53,800 820,000 1,577,000 335000 Pounds 35000 Machine hour 217000 Parts 25500 Tests 5258 Gallons 335000 Pounds 0.26 Per Pound 4.34 Per Machine Hour 1.89 Per Parts 2.08 Per Test 10.23 Per Gallon 2.45 Per Pound $ $ Schedule showing assigning of each product based on the use of cost driver (B) (A) x (B) Cost Assigned = Expected Cost driver x Activity based overhead rate (A) (B) Activity cost pool Home Model Activity based Expected Cost driver overhead rate Cost Assigned Receiving 215000 $ 0.26 $ 55,900 Forming 27000 $ 4.34 $ 117,180 Assembling 165000 $ 1.89 $ 311,850 Testing 15500 $ 2.08 $ 32,240 Painting 3680$ 10.23 $ 37,646 Packaging & Shipping 215000 $ 2.45 $ 526,750 (A) (B) Commercial Model Expected Cost Activity based driver overhead rate 120000 $ 0.26 8000 $ 4.34 52000 1.89 10000 $ 2.08 1578 $ 10.23 120000 $ 2.45 Cost Assigned $ 31,200 $ 34,720 $ 98,280 $ 20,800 $ 16,143 $ 294,000 $ $ Total Cost Assigned Units Produced Overhead Cost Per Unit (b) (a)/(b) 1,081,566 54000 20.03 495,143 10200 48.54