FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire ex

Question

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 home model 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 $1,563,638. Thus, the predetermined overhead rate is $16.24 or ($1,563,638

Explanation / Answer

Product A = $20000 * 2 direct labor hours = 40000 direct labor hours
Product B = $10000 * 3 direct labor hours = 30000 direct labor hours
Total direct labor hours 70000

Product B:
Product B overhead cost per hour = $63000 / 70000 hours = $0.90
Product B overhead cost per unit = $0.90 x 3 hours = $2.70
Product B overhead Cost= 30000 hours x $900 =$27,000

So, answer is $2.70.

Product D
Material Cost per unit $20 (given in question)
Labour Cost per unit $3 (1/2 hr x $6 per hour)
Production Overhead $14 (1/2 x $28 per m/c hr)
Total Unit Cost $37

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