Swifty 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)]. Estimated annual manufacturing overhead is $1,569,040. Thus, the predetermined overhead rate is $16.29 or ($1,569,040 ÷ 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 ofDrivers by ProductActivity Cost Pools Cost Drivers Estimated Overhead Estimated Use ofCost Drivers Home CommercialReceiving Pounds $87,100 335,000 215,000 120,000 Forming Machine hours 148,050 35,000 27,000 8,000 Assembling Number of parts 407,960 217,000 165,000 52,000 Testing Number of tests 45,900 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 $1,569,040 Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rate to 2 decimal places, e.g. 12.25.)Activity Cost Pool EstimatedOverhead EstimatedUse of Cost Drivers Activity-BasedOverhead RateReceiving $enter a dollar amount enter a number of pounds Pounds $enter a number per pound rounded to 2 decimal places per poundForming enter a dollar amount enter a number of machine hours Machine hours $enter a number per machine hour rounded to 2 decimal places per machine hourAssembling enter a dollar amount enter a number of parts Parts $enter a number per part rounded to 2 decimal places per partTesting enter a dollar amount enter a number of tests Tests $enter a number per test rounded to 2 decimal places per testPainting enter a dollar amount enter an amount of gallons Gallons $enter a number per gallon rounded to 2 decimal places per gallonPacking and shipping enter a dollar amount enter an amount of pounds Pounds $enter a number per pound rounded to 2 decimal places per pound $enter a total amount

The costing methodology known as "activity-based costing" (ABC) allocates costs to goods and…

Answered: The company’s managers identified six…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Swifty 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)]. Estimated annual manufacturing overhead is $1,569,040. Thus, the predetermined overhead rate is $16.29 or ($1,569,040 ÷ 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	$87,100		335,000		215,000	120,000
Forming	Machine hours	148,050		35,000		27,000	8,000
Assembling	Number of parts	407,960		217,000		165,000	52,000
Testing	Number of tests	45,900		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
		$1,569,040

Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rate to 2 decimal places, e.g. 12.25.)

Activity Cost Pool	Estimated Overhead	Estimated Use of Cost Drivers	Activity-Based Overhead Rate
Receiving	$enter a dollar amount	enter a number of pounds	Pounds	$enter a number per pound rounded to 2 decimal places	per pound
Forming	enter a dollar amount	enter a number of machine hours	Machine hours	$enter a number per machine hour rounded to 2 decimal places	per machine hour
Assembling	enter a dollar amount	enter a number of parts	Parts	$enter a number per part rounded to 2 decimal places	per part
Testing	enter a dollar amount	enter a number of tests	Tests	$enter a number per test rounded to 2 decimal places	per test
Painting	enter a dollar amount	enter an amount of gallons	Gallons	$enter a number per gallon rounded to 2 decimal places	per gallon
Packing and shipping	enter a dollar amount	enter an amount of pounds	Pounds	$enter a number per pound rounded to 2 decimal places	per pound
	$enter a total amount

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