Problem 171A Part Level Submission Combat Fire Inc manufactu

Problem 17-1A (Part Level Submission) 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)]. Expected annual manufacturing overhead is $1,570,800. Thus, the predetermined overhead rate is $16.31 or ($1,570,800 ÷ 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 $87,700 148,000 409,000 46,000 53,100 827,000 $1,570,800 335,000 215,000 27,000 217,000 165,000 15,500 3,680 335,000 215,000 Home Commercial 120,000 8,000 52,000 10,000 1,578 120,000 35,000 25,500 5,258

Solution

Prepare schedule overhead cost pool :

	Home Model	Commercial Model
Activity cost pool	Expected use of drivers	Activity based overhead rates	Cost assigned	Expected use of drivers	Activity based overhead rate	Cost assigned
Receiving	215000	0.26	55900	120000	0.26	31200
Forming	27000	4.23	114210	8000	4.23	33840
Assembling	165000	1.88	310200	52000	1.88	97760
Testing	15500	1.80	27900	10000	1.80	18000
Painting	3680	10.10	37168	1578	10.10	15938
Packing and shipping	215000	2.47	531050	120000	2.47	296400
Total cost assigned			1076428			493138
Unit produced			54000			10200
Overhead cost per unit			19.93			48.35