Question

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 $1,567,400. Thus, the predetermined overhead rate is $16.28 or ($1,567,400 ÷ 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 Expected Use of Cost Drivers Activity Cost Pools Receiving Forming Assembling Testing Painting Cost Drivers Estimated Overhead $85,500 153,000 410,000 45,000 53,900 820,000 $1,567,400 Home Commercial Pounds 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 120,000 8,000 52,000 10,000 1,578 120,000 Machine hours Number of parts Number of tests Gallons 5,258 Packing and shippingPounds Your answer is incorrect. Try again. 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 61.91 61.91

Answer 1

1	Traditional Product Costing
		Home Model	Commercial Model
	Direct Material Cost per unit	18.5	26.5
	Direct Labor Cost per unit	19	19
	Overhead Cost (16.28*1.5)	24.42	24.42
	Total Unit Cost	61.92	69.92

3		Home Model			Commercial Model
	Activity Cost Pool	Expected Use of Drivers	Activity-Based Overhead Rates	Cost Assigned	Expected Use of Drivers	Activity-Based Overhead Rates	Cost Assigned
	Receiving	215000	0.26	55900	120000	0.26	31200
	Forming	27000	4.37	117990	8000	4.37	34960
	Assembling	165000	1.89	311850	52000	1.89	98280
	Testing	15500	1.76	27280	10000	1.76	17600
	Painting	3680	10.25	37720	1578	10.25	16174.5
	Packing and shipping	215000	2.45	526750	120000	2.45	294000
	Total costs assigned (a)			1077490			492214.5
	Units produced (b)			54000			10200
	Overhead cost per unit [(a) ÷ (b)]			19.95			48.26

Total cost per unit	Home Model	Commercial Model
Direct material cost	18.5	26.5
Direct labor cost	19	19
Overhead cost	19.95	48.26
total cost per unit	57.45	93.76