FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire ex
ID: 2417316 • Letter: F
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.
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.)
Problem 17-1A (Part Level Submission) 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 1,563,980 . Thus, the predetermined overhead rate is $ 16.24 or ($ 1,563,980 ÷ 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 Packing and shipping Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead Home Commercial $73,600 153,000 412,900 49,400 52,580 822,500 $ 1,563,980 335,000 215,000 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 5,258Explanation / Answer
Home Models Commercial Models Activity Cost Pool Expected Use of drivers ABC Rate Cost Assigned Expected Use of drivers ABC Rate Cost Assigned Receiving 215,000.00 0.22 47,300.00 120,000.00 0.22 26,400.00 Forming 27,000.00 4.37 117,990.00 8,000.00 4.37 34,960.00 Assembling 165,000.00 1.90 313,500.00 52,000.00 1.90 98,800.00 Testing 15,500.00 1.94 30,070.00 10,000.00 1.94 19,400.00 Painting 3,680.00 10.00 36,800.00 1,578.00 10.00 15,780.00 Packaging 215,000.00 2.46 528,900.00 120,000.00 2.46 295,200.00 Total 1,074,560.00 490,540.00
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