Question

Question 1 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 $1,574,800. Thus, the predetermined overhead rate is $16.35 or ($1,574,800 ÷ 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 Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Home Commercial Receiving Pounds $87,100 335,000 215,000 120,000 Forming Machine hours 151,900 35,000 27,000 8,000 Assembling Number of parts 405,790 217,000 165,000 52,000 Testing Number of tests 49,980 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215,000 120,000 $1,574,800

Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rate to 2 decimal places, e.g. 12.25.) Activity Cost Pool Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rate x Receiving 80400 335000 Pounds per pound x Forming 150500 35000 Machine hours per machine hour X Assembling 412300 217000 Parts per part nicioni X Testing 51000 25500 Tests per test X Painting 52580 5258) Gallons per gallon X Packing and shipping 837500 335000 Pounds per pound X 1584280 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Activity Cost pool Estimated Ovehead Estimated use of cost drivers Activty based overhead rate Receiving $ 87,100 335000 Pounds $ 0.26 Per Pound Forming $ 151,900 35000 Machine hours $ 4.34 Per Machine hour Assembling $ 405,790 217000 Parts $ 1.87 Per Part Testing 49,980 25500 Tests $ 1.96 Per Test Painting $ 52,580 5258 Gallons $ 10.00 Per Gallon Packaging and shipping $ 827,450 335000 Pounds $ 2.47 Per Pound $ $ 1,574,800