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)]. Expected annual manufacturing overhead is $1,570,706. Thus, the predetermined overhead rate is $16.31 or ($1,570,706 ÷ 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.
Expected Use of
Drivers by Product
Activity Cost Pools
Cost Drivers
Estimated Overhead
Expected Use of
Cost Drivers
Home
Commercial
Receiving Pounds
$87,100
335,000
215,000
120,000
Forming Machine hours
157,500
35,000
27,000
8,000
Assembling Number of parts
390,600
217,000
165,000
52,000
Testing Number of tests
61,200
25,500
15,500
10,000
Painting Gallons
36,806
5,258
3,680
1,578
Packing and shipping Pounds
837,500
335,000
215,000
120,000
$1,570,706
1.)Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e. g. 12.25.)
Home Model
Commercial Model
Total unit cost $
Combat Fire, Inc. manufactures steel cylinders and
$
Combat Fire, Inc. manufactures steel cylinders and
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2.)Under ABC, complete the schedule showing the computations of the activity-based overhead rates (per cost driver). (Round your answers to 2 decimal places, e. g. 2.25.)
3.)Complete the schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Use rates from part b above and round cost assigned to 0 decimal places, e. g. 12,250. Round overhead per unit to 2 decimal places, e. g. 2.25. Note that due to rounding your total cost assigned will be slightly different than calculated above.)
Cost Driver Home Model
Commercial Model
Cost Assigned
4.) Compute the total cost per unit for each product under ABC. (Round your answers to 2 decimal places, e. g. 12.25.)
Home Model $
Commercial Model $
5.)Classify each of the activities as a value-added activity or a non-value-added activity.
Activity
Receiving value-addednon-value-added
Forming non-value-addedvalue-added
Assembling value-addednon-value-added
Testing value-addednon-value-added
Painting non-value-addedvalue-added
Packing and shipping value-addednon-value-added
Answers: 3
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