Unformatted Attachment Preview
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire
extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The
homemodel is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds
of multipurpose 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 hrs. x (54,000 + 10,200)]. Expected annual
manufacturing overhead is $1,576,596. Thus, the predetermined overhead rate is
$16.37 or ($1,576,596 ÷ 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.
Activity Cost Pools
Cost Drivers
Estimated Overhead
Receiving
Pounds
$68,800
Forming
Machine hours
154,700
Assembling
Number of parts
411,100
Testing
Number of tests
52,700
Painting
Gallons
63,096
Packing and shipping
Pounds
826,200
$1,576,596
Under traditional product costing, compute the total unit cost of each
product. (Round answers to 2 decimal places, e.g. $12.25.)
Home Model
Total unit cost
Commercial Model
$
$
LINK TO TEXT
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
Receiving
Forming
Estimated
Overhead
$
Expected
Use of Cost Drivers
Pounds
Machine hours
Activity-Based
Overhead Rate
$
$
per pound
per machine hour
Expecte
Cost D
Assembling
Parts
Testing
Tests
Painting
Gallons
Packing and shipping
Pounds
$
$
$
$
per part
per test
per gallon
per pound
$
LINK TO TEXT
Prepare a schedule assigning each activity’s overhead cost pool to each product based
on the use of cost drivers. (Round overhead cost per unit to 2 decimal places,
e.g. $12.25 and cost assigned to 0 decimal places, e.g. $2,500.)
Activity
Cost Pool
Receiving
Forming
Assembling
Testing
Painting
Packing and
shipping
Total
costs
assigned (a)
Units
produced (b)
Overhead
cost per unit
[(a) ÷ (b)]
Home Model
ActivityExpected
Based
Use of
Overhead
Cost
Drivers
Rates
Assigned
Commercial Model
ActivityExpected
Based
Cost
Use of
Overhead Assigned
Drivers
Rates
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
LINK TO TEXT
Compute the total cost per unit for each product under ABC. (Round answer to 2
decimal places, e.g. $12.25.)
Home Model
Total cost per unit
$
Commercial Model
$
LINK TO TEXT
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