ch 17 exercise

# ch 17 exercise - P17-1A FireOut Inc manufactures steel...

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P17-1A FireOut, 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 multipurpose 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. 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. Expected Use of Drivers by Product Cost Drivers Estimated Overhead Home \$ 70,350 Machine hours 150,500 Number of parts 390,600 Number of tests 51,000 52,580 787,250 \$1,502,280 Hint: Assign overhead using traditional costing and ABC; compute unit costs; classify activities as value- or non– value-added. Instructions (a) Under traditional product costing, compute the total unit cost of each prod comparative schedule of the individual costs by product (similar to Illustr Unit cost—H.M. \$60.90 (b) Under ABC, prepare a schedule showing the computations of the activity driver). (c) Prepare a schedule assigning each activity's overhead cost pool to each pr drivers. (Include a computation of overhead cost per unit, rounding to the Cost assigned—H.M. \$1,031,300 (d) Compute the total cost per unit for each product under ABC. Cost/unit—H.M. \$56.60

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## This note was uploaded on 11/06/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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ch 17 exercise - P17-1A FireOut Inc manufactures steel...

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