Fireout inc manufactures steel cylinders and nozzles for

Reference no: EM13597528

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 1 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. Therefore, total annual direct labor hours are 96,300 or [1.5 hrs × (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,502,280. Thus, the predetermined overhead rate is $15.60 or ($1,502,280 ÷ 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 Pool Cost Driver
Estimated Overhead Expected Use
of Cost Drivers Expected Use
of Drivers by Product

Home Commercial

Receiving Pounds $70,350 335,000 215,000 120,000
Forming Machine hours 150,500 35,000 27,000 8,000
Assembling Number of parts 390,600 217,000 165,000 52,000
Testing Number of tests 51,000 25,500 15,500 10,000
Painting Gallons 52,580 5,258 3,680 1,578
Packing and shipping Pounds 787,250
335,000 215,000 120,000
$1,502,280

Reference no: EM13597528

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