Problem 161A Combat Fire Inc manufactures steel cylinders an

Problem 16-1A 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 $1,567,900, Thus, the predetermined overhead rate is $16.28 or $1,567,900 ÷ 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 Commercial 120,000 8,000 52,000 10,000 1,578 120,000 Activity Cost Pools Recelving Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead 85,400 155,000 403,000 45,000 55,500 824,000 $1,567,900 Home 335,000 215,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 Testing Painting Packing and shipping 5,258 Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.25.) Home Model Commercial Model Total unit cost Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost drive). (Round overhead rate to 2 decimal places, e.g. 12.25) Activity Cost Pool Estimated Receiving Activity-Based Overhead Rate Use of Cost Drivers Pounds per pound per machine hour per part per test per gallon per pound Machine hours Parts Testing Painting Packing and shipping Tests Gallons Pounds 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.)

Solution

Traditional costing

ABC

Schedule

Cost per unit

	Home model	Commercial model
Direct material cost	$18.50	$26.50
Direct labor cost	19.00	19.00
Overhead cost	16.28 x 1.5 = 24.42	16.28 x 1.5 = 24.42
Total unit cost	$61.92	$69.92