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)]. 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 ofDrivers by ProductActivity Cost Pools Cost Drivers Estimated Overhead Estimated Use ofCost Drivers Home CommercialReceiving Pounds $ 90,450 335,000 215,000 120,000Forming Machine hours 150,850 35,000 27,000 8,000Assembling Number of parts 401,450 217,000 165,000 52,000Testing Number of tests 52,020 25,500 15,500 10,000Painting Gallons 63,096 5,258 3,680 1,578Packing and shipping Pounds 827,450 335,000 215,000 120,000 $ 1,585,316 Prepare a schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Roundoverhead cost per unit to 2 decimal places, e.g. 12.25 and cost assigned to 0 decimal places, eg. 2,500.)Commercial ModelEstimated Use ofActivity-BasedCost AssignedDriversOverhead RatesCost Assigned242$2424%24%24%24%24 Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) acommercial 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 ofmulti-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual directlabor hours are 96,300 or (1.5 hours x (54,000 + 10,200)). Estimated annual manufacturing overhead is $ 1,585,316. Thus, thepredetermined overhead rate is $ 16.46 or ($ 1,585,316 - 96,300) per direct labor hour. The direct materials cost per unit is $18.50for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and thecommercial models.The company's managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.Estimated Use ofDrivers by ProductEstimated Use ofActivity Cost PoolsCost DriversEstimated OverheadCost DriversHomeCommercialReceivingPounds$ 90,450335,000215,000120,000FormingMachine hours150,85035,00027,0008,000AssemblingNumber of parts401,450217,000165,00052,000TestingNumber of tests52,02025,50015,50010,000PaintingGallons63,0965.2583,6801,578Packing and shippingPounds827,450335,000215,000120,000$ 1,585,316

Activity Based Overhead rate = Estimated Overhead/Estimated Use of Cost Drivers Cost Assigned =…

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)]. 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 Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of 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

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

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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)]. 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
Activity Cost Pools	Cost Drivers	Estimated Overhead	Estimated Use of 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

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, eg. 2,500.)
Commercial Model
Estimated Use of
Activity-Based
Cost Assigned
Drivers
Overhead Rates
Cost Assigned
24
2$
24
24
%24
%24
%24
%24

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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