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Business, 15.10.2020 08:01 FedxUp

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 à (54,000 + 10,200)]. Estimated annual manufacturing overhead is $1,584,280. Thus, the predetermined overhead rate is $16.45 or ($1,584,280 ÷ 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:

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Home Commercial
Receiving pounds $88,200 335,000 215,000 120,000
Forming Machine hours 152,000 35,000 27,000 8,000
Assembling Number of parts 410,000 217,000 165,000 52,000
Testing Number of tests 53,000 25,500 15,500 10,000
Painting Gallons 53,800 5,258 3,680 1,578
Packing and shipping Pounds 820,000 335,000 215,000 120,000
$1,577,000
Required:
a. Under traditional product costing, compute the total unit cost of each product.
b. Prepare a schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers.
c. Compute the total cost per unit for each product under ABC.
d. Classify each of the activities as a value-added activity or a non-value-added activity.

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