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)]. 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. Estimated Use of
Drivers by Product
Activity Cost Cost Drivers Estimated Estimated Use of
Pools Overhead 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).