| 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 × (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,582,100. Thus, the predetermined overhead rate is $16.43 or ($1,582,100 ÷ 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 | | Activity Cost Pools | | Cost Drivers | | Estimated Overhead | | Expected Use of
Cost Drivers | | Home | | Commercial | | Receiving | | Pounds | | $87,000 | | 335,000 | | 215,000 | | 120,000 | | Forming | | Machine hours | | 155,000 | | 35,000 | | 27,000 | | 8,000 | | Assembling | | Number of parts | | 407,000 | | 217,000 | | 165,000 | | 52,000 | | Testing | | Number of tests | | 50,000 | | 25,500 | | 15,500 | | 10,000 | | Painting | | Gallons | | 57,100 | | 5,258 | | 3,680 | | 1,578 | | Packing and shipping | | Pounds | | 826,000 | | 335,000 | | 215,000 | | 120,000 | | | | | $1,582,100 | | | | | | | |
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