Question

Question 4 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 (58,000 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 (16,915 units), two-litre cylinder that holds 10 kilograms of multi-purpose dry chemical at 390 PSI. Both products require 2.00 hours of direct labour for completion. Therefore, total annual direct labour hours are 149,830 or [2.00 hrs. x (58,000 + 16,915). Estimated annual manufacturing overhead is $1,498,300. Thus, the predetermined overhead rate is $10.00 or ($1,498,300 ÷ 149,830) per direct labour hour. The direct materials cost per unit is $18.92 for the home model and $27.08 for the commercial model. The direct labour cost is $19.60 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: Estimated Estimated Use Overhead Estimated Use Activity Cost Pools Cost Drivers of Cost Drivers Receiving Forming Assembling Testing Painting Packing and shipping Kilograms Machine hours Number of parts Number of tests Litres Kilograms $67,400 151,200 396,000 54,000 54,600 775,100 $1,498,300 337,000 216,000 36,000 28,000 220,000 167,000 27,000 16,000 0 4,000 337,000 216,000 of Drivers by Product Home Commercial 121,000 8,000 53,000 11,000 3,000 121,000 7,00

Answer 1

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