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 x (54,000 + 10,200)). Estimated annual manufacturing overhead is $1,576,678. Thus, the predetermined overhead rate is $16.37 or ($1,576,678 +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 Estimated Use of Activity Cost Pools Cost Drivers Estimated Overhead Cost Drivers Commercial Receiving Pounds $90,450 335,000 215,000 120,000 Forming Machine hours 150,850 35,000 27,000 8,000 Assembling Number of parts 405,790 217,000 165,000 52,000 Testing Number of tests 51,000 25,500 15,500 10,000 Painting Gallons 57,838 5,258 3,680 1,578 Packing and shipping Pounds 820,750 335,000 215,000 120,000 $1,576,678 Home Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.50.) Home Model Commercial Model Total unit cost

Answer 1

$19 $24.56 Solution : Page! Requirement IUnder traditional produit casting, compute the total unit last of each product, Home Model Commercial Model Direct Materials per unit $18.50 $26.50 Direct Labor Cast per unit $19 Overhead Cost per mit $24.56 (1.5 hours X $ 16.37). Total Unit Cast $62.06 $70.06 uirement 2: 2 Activity Cat Estimated Esteinated Use Actinity-Based Pool Overheads of lat at Drivers Querhead Rate (B) (AEB) Recenning $90,450 335,000 Pounds $0.27 per pound forming $150,850 35,000 Machine hours $4.31 per machine hour Assembling $405,790 217,000 Parts $1.87 per part Testing $ 51,000 25,500 Tests $2 per test Painting $ 57,838 5,258 Gallors $ 11 per gallon Packefing and $820,750 | 335,000 Pounds ($2.45 per pound Shipping $1576,678

Requirement 3 (A) (6) (0) ( (CAD) Page 2 2 Home Model Commercial Model Activity Cat Estimated Activity - Lost Estimated Activity. Cost Pool Use of Based Assigned Use of based Assigned Driners / Querhead Dainers Querhead Rates Rates (AXB) (6) Receining 215,000 $0.27 $58,050 120,000 $0.27 $32,you Forming 27,000 $4.31 $116,370 8,000/$4.31 $34,480 Assembling | 165,000 $1.87 $308,550 52000 $1.87 $97, 240 Testing 15,500 $2 $31,000 10,000 $2 $ 20.000 Painting 3,680 $11 $40480 1578 $11 $17,358 Packaging 215,000 $2.45 $526,750 120,000 $2.45 $294,000 and Shipping Total , coats assigned (a) $108/200 Units Produced (6) 54,000 $425,478 10,200 Querhead cost per unit [(a) + (6) $20.02 $48.58

Page 3 Requiremently compute the total cost per mit for each product under ABC. Home Model Commercial Model Direct Materials per unit $18.50 $26.50 Direct laber Cast per unit $ 19 Querhead Cost per mit $20.02 $48.58 Total Cost per mit $57.52 $94.08 Requirement 5: Classify each of 영 the activities as a value-added activity or a non-value added activity. Activity Recening Mon - Value Added Forning Value Added Assembling Value Added Testing Mon-Value Added Painting Value Added Packaging and Shipping Value Added