# Question & Answer: Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguishe…..

Problem 17-1A (Part Level Submission)

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 × (54,000 + 10,200)]. Expected annual manufacturing overhead is \$1,572,700. Thus, the predetermined overhead rate is \$16.33 or (\$1,572,700 ÷ 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.

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The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows:

Expected Use of
Drivers by Product
Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of
Cost Drivers
Home Commercial
Receiving Pounds \$87,900 335,000 215,000 120,000
Forming Machine hours 150,000 35,000 27,000 8,000
Assembling Number of parts 400,000 217,000 165,000 52,000
Testing Number of tests 48,000 25,500 15,500 10,000
Painting Gallons 56,800 5,258 3,680 1,578
Packing and shipping Pounds 830,000 335,000 215,000 120,000
1.)Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.25.)

 Home Model Commercial Model Total unit cost \$ \$

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2.)Under ABC, complete the schedule showing the computations of the activity-based overhead rates (per cost driver). (Round your answers to 2 decimal places, e.g. 2.25.)

3.)Complete the schedule assigning each activity’s overhead cost pool to each product based on the use of cost drivers. (Use rates from part b above and round cost assigned to 0 decimal places, e.g. 12,250. Round overhead per unit to 2 decimal places, e.g. 2.25. Note that due to rounding your total cost assigned will be slightly different than calculated above.)
Cost Driver Home Model
Commercial Model
Cost Assigned

4.) Compute the total cost per unit for each product under ABC. (Round your answers to 2 decimal places, e.g. 12.25.)
Home Model \$
Commercial Model \$

5.)Classify each of the activities as a value-added activity or a non-value-added activity.
Activity