Weygandt, Managerial Accounting, 7e Managerial Accounting (ACCT 202) FULL SCREEN

Question

Weygandt, Managerial Accounting, 7e Managerial Accounting (ACCT 202) FULL SCREEN Combat Fire, tne manufactures steel cyinders and nozzies for two models of fire ext 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 PS. The commercial moder is a (10,200 units), two-galion cyinder that holds 10 pounds of multi-purpose dry chemical at 390 PSL Both products require 1.5 hours of Therefore, tot-annual direct labor hors are 96 300 1.5 ho s (54 000 + 10 2001 . Expeded an . mandacturing o hidsi S70 800 Th , the overhead rate is $16.31 or ($1,570.800 96,300) per drect The direct model. The direct laber cost is $19 per unt for both the home and the inguishers:(3)a home fire extingusher and (2)a commencial fre direct labor abor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial The company's managers identified si activity cost pools and related cost drivers and accumulated overhead by cost pool as follows Drivers by Product Activity Cest Pools Cost DriversEstimated Overhead Cost Drivers Home 20,000 Machine hours Number of parts Number of 35,000 215,000 35,000 217,000 165,000 25,500 15,500 148,000 10,000 53,100 Packing and shipping Pounds 3,000 215,000 Under traditional product costing, compute the total unit cost of each product, (Round answers to 2 decimal places, e.g. 12.25) Total unit cost verson 4 24 s , 8

Explanation / Answer

Combat Fire Inc

Home

Commercial

Direct material

$18.50

$26.50

Direct labor

$19

$19

Manufacturing overhead

$24.47

$24.47

Total unit cost

$61.97

$69.97

Manufacturing overhead cost per unit –

Predetermined overhead rate = $1,570,800/96,300 hours = $16.31 per direct labor hour

Number of hours needed for each product = 1.5 hours

Overhead cost per unit = 16.31 x 1.5 hours = $24.47 per unit

Activity Cost Pool

Estimated Overhead

Expected use of cost drivers

Activity Based overhead rates

Receiving

$87,700

335,000 pounds

$0.26 per pound

Forming

$148,000

35,000 machine hours

$4.23 per MH

Assembling

$409,000

217,000 parts

$1.88 per part

Testing

$46,000

25,500 tests

$1.80 per test

Painting

$53,100

5,258 gallons

$10.1 per gallon

Packing and Shipping

$827,000

335,000 pounds

$2.47 per pound

Home

Commercial

Activity Cost Pool

Estimated Use of Drivers

Activity-Based Overhead Rates

Cost Assigned

Estimated Use of Drivers

Activity-Based Overhead Rates

Cost Assigned

Receiving

215,000 pounds

$0.26 per pound

$56,285

120,000 pounds

$0.26 per pound

$31,415

Forming

27,000MHs

$4.23 per MHr

$114,171

8,000 MH

$4.23 per MHr

$33,829

Assembling

165,000 parts

$1.88 per part

$310,991

52,000 parts

$1.88 per part

$98,009

Testing

15,500 tests

$1.80 per test

$27,961

10,000 tests

$1.80 per test

$18,039

Painting

3,680 gallons

$10.1 per galon

$37,164

1,578 gallons

$10.1 per galon

$15,936

Packing and Shipping

215,000 pounds

$2.47 per pound

$530,761

120,000 pounds

$2.47 per pound

$296,239

Total cost assigned (a)

$1,077,333

$493,467

Units produced (b)

54,000

10,200

Overhead cost per unit [(a)÷ (b)]

$19.95

$48.38

Computation of total cost per unit for each product under ABC:

Home

Commercial

Direct material

$18.50

$26.50

Direct labor

$19

$19

Manufacturing overhead

$19.95

$48.38

Total unit cost

$57.45

$93.88

Classify each of the activities as a value-added activity or a non-value-added activity:

Activity

Receiving

Non-Value-Added

Forming

Value-Added

Assembling

Value-Added

Testing

Non-Value-Added

Painting

Value-Added

Packing and Shipping

Value-Added

Home

Commercial

Direct material

$18.50

$26.50

Direct labor

$19

$19

Manufacturing overhead

$24.47

$24.47

Total unit cost

$61.97

$69.97

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