Drivers by Product Estimated Use Estimated Overhead of Activity Cost Pools Cost Drivers Cost Drivers Home Commercial Receiving Pounds $90,450 335,000 215,000 120,000 Forming Machine hours 150,850 35,000 27,000 8,000 Assembling Number of parts 405,790 217,000 165,000 52,000 Testing Number of tests 51,000 25,500 15,500 10,000 Painting Gallons 57,838 5,258 3,680 1,578 Packing and shipping Pounds 820,750 335,000 215,000 120,000 $1,576,678
Drivers by Product Estimated Use Estimated Overhead of Activity Cost Pools Cost Drivers Cost Drivers Home Commercial Receiving Pounds $90,450 335,000 215,000 120,000 Forming Machine hours 150,850 35,000 27,000 8,000 Assembling Number of parts 405,790 217,000 165,000 52,000 Testing Number of tests 51,000 25,500 15,500 10,000 Painting Gallons 57,838 5,258 3,680 1,578 Packing and shipping Pounds 820,750 335,000 215,000 120,000 $1,576,678
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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![Vaughn 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 latior 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 $1,576,678. Thus, the
predetermined overhead rate is $16.37 or ($1,576,678 + 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
Estimated Use
Estimated
of
Activity Cost Pools
Cost Drivers
Overhead
Cost Drivers
Home
Commercial
Receiving
Pounds
$90,450
335,000
215,000
120,000
Forming
Machine hours
150,850
35,000
27,000
8,000
Assembling
Number of parts
405,790
217,000
165,000
52,000
Testing
Number of tests
51,000
25,500
15,500
10,000
Painting
Gallons
57,838
5,258
3,680
1,578
Packing and shipping
Pounds
820,750
335,000
215,000
120,000
$1,576,678
Compute the total cost per unit for each product under ABC. (Round answers to 2 decimal places, eg. 12.25.)
Home Model
Commercial Model
Total cost per unit
%24
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b4987ea-0af9-40bb-bde0-d5c96de3887b%2F01b96a8b-7192-4367-9675-32da6520f3c9%2Fp3ohtld_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Vaughn 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 latior 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 $1,576,678. Thus, the
predetermined overhead rate is $16.37 or ($1,576,678 + 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
Estimated Use
Estimated
of
Activity Cost Pools
Cost Drivers
Overhead
Cost Drivers
Home
Commercial
Receiving
Pounds
$90,450
335,000
215,000
120,000
Forming
Machine hours
150,850
35,000
27,000
8,000
Assembling
Number of parts
405,790
217,000
165,000
52,000
Testing
Number of tests
51,000
25,500
15,500
10,000
Painting
Gallons
57,838
5,258
3,680
1,578
Packing and shipping
Pounds
820,750
335,000
215,000
120,000
$1,576,678
Compute the total cost per unit for each product under ABC. (Round answers to 2 decimal places, eg. 12.25.)
Home Model
Commercial Model
Total cost per unit
%24
$
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