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 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 * (54,000 + 10,200)). Estimated annual manufacturing overhead is $1,569,040. Thus, the predetermined overhead rate is $16.29 or ($1.569,040 = 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 Estimated Use of Drivers by Product Activity Cost Pools Receiving Forming Assembling Testing Painting Packing and shipping Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead $87.100 148.050 407,960 45.900 52.580 827450 51.569,040 Estimated Use of Cost Drivers 335.000 35.000 217.000 25.500 5,258 335.000 Home 215.000 27.000 165.000 15.500 3.680 215.000 Commercial 120.000 8.000 52.000 10,000 1578 120.000

Answer 1

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A B с D E F H 1 2. 3 4 Estimated Expected use Activity cost pool Overheads $ of Cost Drivers Receiving 87100 335000 Forming 148050 35000 Assembling 407960 217000 Testing 45900 25500 Painting 52580 5258 Packing and Shipping 827450 335000 1569040 Activity Based Overhead Rate = Estimated Overheads $ / Expected 0.2600 Per pound 4.2300 Per machine hour 1.8800 Per part 1.8000 per test 10.0000 Per Gallons 2.4700 Per pound 5 6 7 8 9 10 11 12 13 14 15 Home model Commercial model Activity-Based Acitivity Cost Pool Estimated Use Estimated Use of Activity-Based Overhead Cost Assignment Cost Assignment of Drivers Drivers Overhead Rates Rates Receiving 215000 0.2600 55900 120000 0.2600 31200 Forming 27000 4.2300 114210 8000 4.2300 33840 Assembling 165000 1.8800 310200 52000 1.8800 97760 Testing 15500 1.8000 27900 10000 1.8000 18000 Painting 3680 10.0000 36800 1578 10.0000 15780 Packing and Shipping 215000 2.4700 531050 120000 2.4700 296400 Total costs assigned 1076060 492980 Units Produced 54000 10200 Overhead cost per unit 19.92703704 48.33137255 16 17 18 19 20 21

For calculation ref:

A B C D E F G H 1 Activity cost pool 2 Estimated Overheads $ 87100 3 4 148050 Expected use of Activity Based Overhead Rate = Estimated Cost Drivers Overheads $ / Expected use of Cost Drivers 335000 =C3/D3 Per pound 35000 =C4/D4 Per machine hour 217000 =C5/05 Per part 25500 =C6/D6 per test 5258 =C7/07 Per Gallons 335000 =C8/D8 Per pound 5 Receiving Forming Assembling Testing Painting Packing and Shipping 407960 6 45900 7 8 52580 827450 =SUM(C3:08) 9 10 11 12 13 14 15 Home model Commercial model Activity-Based Acitivity Cost Pool Estimated Use of Activity-Based Cost Assignment Estimated Use of Drivers Overhead Cost Assignment Drivers Overhead Rates Rates Receiving 215000 =E3 =C13*D13 120000 =E3 =F13*G13 Forming 27000 =E4 =C14*D14 8000 =E4 =F14*G14 Assembling 165000 =E5 =C15*D15 52000 1=E5 F15*G15 Testing 15500 =E6 =C16*D16 10000 =E6 =F16 G16 Painting 3680 =E7 1=C17*D17 1578 1=E7 =F17*G17 Packing and Shipping 215000 =E8 =C18*D18 120000 =E8 =F18*G18 Total costs assigned =SUM(E13:E18) =SUM(H13:H18) Units Produced 54000 10200 Overhead cost per unit =E19/E20 =H19/H20 16 17 18 19 20 21 22 23 24 Sheet169 Sheet170 Sheet171 Sheet172 Sheet173 Sheet174 Sheet175 Stats Ready