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 Pounds $83,750 335,000 215,000 120,000 Forming Machine hours 151,900 35,000 27,000 8,000 Assembling Number of parts 401,450 217,000 165,000 52,000 Testing Number of tests 48,960 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215,000 120,000 $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.) Home Model Activity-Based Overhead Rates Commercial Model Cost Assigned Activity-Based Overhead Rates Cost Assigned 0.25 $ 53,750 $ 0.25 30,000 117,180 $ 4.34 Activity Cost Pool Use of Drivers by Product Receiving 215,000 Forming 27,000 $ 4.34 34,720 Assembling 165,000 $ 185 305,250 $ 1.85 96,200 Testing 15,500 $ 1.92 29,760 S 1.92 19,200 3,680 $ 10.00 36,800 $ 10 15,780 Painting Packing and 215,000 shipping Total costs assigned (a) Units produced (b) Overhead cost per unit [(a)+ (b)] 54,000 10,200

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 Pounds $83,750 335,000 215,000 120,000 Forming Machine hours 151,900 35,000 27,000 8,000 Assembling Number of parts 401,450 217,000 165,000 52,000 Testing Number of tests 48,960 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 Packing and shipping Pounds 827,450 335,000 215,000 120,000 $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.) Home Model Activity-Based Overhead Rates Commercial Model Cost Assigned Activity-Based Overhead Rates Cost Assigned 0.25 $ 53,750 $ 0.25 30,000 117,180 $ 4.34 Activity Cost Pool Use of Drivers by Product Receiving 215,000 Forming 27,000 $ 4.34 34,720 Assembling 165,000 $ 185 305,250 $ 1.85 96,200 Testing 15,500 $ 1.92 29,760 S 1.92 19,200 3,680 $ 10.00 36,800 $ 10 15,780 Painting Packing and 215,000 shipping Total costs assigned (a) Units produced (b) Overhead cost per unit [(a)+ (b)] 54,000 10,200

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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