Coronado 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)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 + 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. Use of Drivers by Product Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Home Commercial Receiving Forming Assembling Pound $83,750 Machine Tours 151,900 335,000 35,000 215,000 27,000 120,000 8,000 Number of parts 101,150 217,000 165,000 52,000 Testing Number of tests 18,960 25.500 15,500 10,000 Painting Galloris 52,580 5,258 3,680 Packing and shipping Pounds 827,450 335.000 215,000 1,578 120,000 $1,566,090 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 O decimal places, e.g. 2,500.) Activity-Based Overhead Rates Cost Assigned 53,750 Use of Drivers by Product 120,000 8,000 Commercial Model Activity-Based Overhead Rates Cost Assigned 0.25 $ 30,000 Home Model Activity Cost Pool Use of Drivers by Product Receiving 215,000 0.25 4.34 Forming 27,000 434 117,180 52,000 1.85 Assembling 165,000 $ 185 305,250 34.720 96,200 19.200 10,000 2.92 192 29,760 1,578 10 15,70 Testing 15,500 Painting 3400 1000 36,000 120,000 Packing and shipping 215,000 247 $31,000 Total 1,073,790 costs assigned (a) Units 206,400 492300 10,200 produced (b) Overhead cost per unit [la). 54,000 48.26 Compute the total cost per unit for each product under ABC. (Round answers to 2 decimal places, e.g. 12.25.) Total cost per unit $ Home Model Commercial Model

Coronado 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)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 + 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. Use of Drivers by Product Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Home Commercial Receiving Forming Assembling Pound $83,750 Machine Tours 151,900 335,000 35,000 215,000 27,000 120,000 8,000 Number of parts 101,150 217,000 165,000 52,000 Testing Number of tests 18,960 25.500 15,500 10,000 Painting Galloris 52,580 5,258 3,680 Packing and shipping Pounds 827,450 335.000 215,000 1,578 120,000 $1,566,090 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 O decimal places, e.g. 2,500.) Activity-Based Overhead Rates Cost Assigned 53,750 Use of Drivers by Product 120,000 8,000 Commercial Model Activity-Based Overhead Rates Cost Assigned 0.25 $ 30,000 Home Model Activity Cost Pool Use of Drivers by Product Receiving 215,000 0.25 4.34 Forming 27,000 434 117,180 52,000 1.85 Assembling 165,000 $ 185 305,250 34.720 96,200 19.200 10,000 2.92 192 29,760 1,578 10 15,70 Testing 15,500 Painting 3400 1000 36,000 120,000 Packing and shipping 215,000 247 $31,000 Total 1,073,790 costs assigned (a) Units 206,400 492300 10,200 produced (b) Overhead cost per unit [la). 54,000 48.26 Compute the total cost per unit for each product under ABC. (Round answers to 2 decimal places, e.g. 12.25.) Total cost per unit $ Home Model Commercial Model

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 25P: Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio...

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