Question

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)]. 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 52.580 827,450 $1.569,040 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 1.578 120.000

Answer 1

					Use of			OH
Activity Cost Pool			Estimated OH		Drivers			Rates
Receiving			$      87,100.00		335000	pounds		$      0.26	per pound
Forming			$   1,48,050.00		35000	machine hours		$      4.23	per hour
Assembling			$   4,07,960.00		217000	parts		$      1.88	per part
Testing			$      45,900.00		25500	tests		$      1.80	per test
Painting			$      52,580.00		5258	gallons		$   10.00	par gallon
Packing and shipping			$   8,27,450.00		335000	pounds		$      2.47	per pound
			$ 15,69,040.00