Expected Use of Drivers by Product Activity Cost Pools Cost Drivers Estimated Ov
ID: 2395065 • Letter: E
Question
Expected Use of
Drivers by Product
Activity Cost Pools
Cost Drivers
Estimated Overhead
Expected Use of
Cost Drivers
Home
Commercial
$86,200
335,000
215,000
120,000
155,000
35,000
27,000
8,000
413,000
217,000
165,000
52,000
47,000
25,500
15,500
10,000
60,800
5,258
3,680
1,578
823,000
335,000
215,000
120,000
$1,585,000
(a)
Home Model
Commercial Model
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 $1,585,000. Thus, the predetermined overhead rate is $16.46 or ($1,585,000 ÷ 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$86,200
335,000
215,000
120,000
Forming Machine hours155,000
35,000
27,000
8,000
Assembling Number of parts413,000
217,000
165,000
52,000
Testing Number of tests47,000
25,500
15,500
10,000
Painting Gallons60,800
5,258
3,680
1,578
Packing and shipping Pounds823,000
335,000
215,000
120,000
$1,585,000
Explanation / Answer
Answers
Working
Home Model
Commercial Model
A [given]
Direct Material cost per unit
$ 18.50
$ 26.50
B [given]
Direct Labor cost per unit
$ 19.00
$ 19.00
C [given]
Direct Labor hour per unit
1.5
1.5
D [given]
Predetermined Overhead rate per labor hour
$ 16.46
$ 16.46
E = C x D
Manufacturing Overhead cost
$ 24.69
$ 24.69
F = A + B + E
Total Unit Cost under Traditional Method
$ 62.19
$ 70.19
Home Model
Commercial Model
Total unit cost
$ 62.19
$ 70.19
Working
Home Model
Commercial Model
A [given]
Direct Material cost per unit
$ 18.50
$ 26.50
B [given]
Direct Labor cost per unit
$ 19.00
$ 19.00
C [given]
Direct Labor hour per unit
1.5
1.5
D [given]
Predetermined Overhead rate per labor hour
$ 16.46
$ 16.46
E = C x D
Manufacturing Overhead cost
$ 24.69
$ 24.69
F = A + B + E
Total Unit Cost under Traditional Method
$ 62.19
$ 70.19
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.