Managerial Accounting - Activity-Based Costing

naanorppn
timer Asked: Jun 8th, 2015

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FireOut.docx 

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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
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