Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) 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 $ 1.585,316. Thus, the predetermined overhead rate is $ 16.46 or ($ 1,585,316 + 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 follow Estimated Use of Drivers by Product Estimated Use of Activity Cost Pools Cost Drivers Estimated Overhead Cost Drivers Home 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 401.450 217,000 165.000 52.000 Testing Number of tests 52,020 25,500 15,500 10.000 Painting Gallons 63,096 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215.000 120,000 $1.585,316
Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) 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 $ 1.585,316. Thus, the predetermined overhead rate is $ 16.46 or ($ 1,585,316 + 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 follow Estimated Use of Drivers by Product Estimated Use of Activity Cost Pools Cost Drivers Estimated Overhead Cost Drivers Home 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 401.450 217,000 165.000 52.000 Testing Number of tests 52,020 25,500 15,500 10.000 Painting Gallons 63,096 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215.000 120,000 $1.585,316
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Compute the total cost per unit for each product under ABC. (Round answer to 2 decimal places, eg. 12.25.)
Commercial Model
Home Model
Total cost per unit
24
eTextbook and Media
Classify each of the activities as a value-added activity or a non-value-added activity.
Activity
Receiving
Forming
Assembling
Testing
Painting
Packing and shipping
>
>
Transcribed Image Text: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 $ 1,585,316. Thus, the
predetermined overhead rate is $ 16.46 or ($ 1,585,316 - 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
Home
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
401,450
217,000
165,000
52,000
Testing
Number of tests
52,020
25,500
15,500
10,000
Painting
Gallons
63,096
5,258
3,680
1,578
Packing and shipping
Pounds
827,450
335,000
215,000
120,000
$1,585,316
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