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Management Accounting

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Chapter 19 Checkpoint Problem FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: the Home model and the Commercial model. Direct Material Costs: Home $18.50 per unit Commercial $26.50 per unit Direct Labor Costs: Home $19.00 per unit Commercial $19.00 per unit Budgeted Overhead: Receiving $ 70,350 Forming $ 1,50,500 Assembling $ 4,12,300 Testing $ 51,000 Painting $ 52,580 Packing and Shipping $ 8,20,750 Total budgeted overhead costs $1,557,480 Direct Labor Hours: Home (54,000 units x 1.5 hours per unit) 81,000 Commercial (10,200 units x 1.5 hours per unit) 15,300 Total Direct Labor Hours 96,300 Pounds Home 2,15,000 Commercial 1,20,000 Total Pounds 3,35,000 Machine Hours: Home 27,000 Commercial 8,000 Total Machine Hours 35,000 Number of Parts: Home 1,65,000 Commercial 52,000 Total Number of Parts 2,17,000 Number of Tests: Home 15,500 Commercial 10,000 Total Number of Tests 25,500 Painting: Home 3,680 Commercial 1,578 Total Number of Gallons 5,258 Packing and Shipping: Home 2,15,000 Commercial 1,20,000 Total Pounds 3,35,000 REQUIRED: A. Assuming the use of a single plant wide overhead rate based on direct labor hours, determine the -1 total overhead cost and PER UNIT overhead cost assigned to the Home and to the Commercial fire extinguishers and -2 determine the total manufacturing cost per unit(direct material, direct labor, and overhead cost) for the Home and Commercial fire extinguishers. B. Assuming activity based costing, determine the -1 total overhead cost and PER UNIT overhead cost assigned to the Home and the Commercial fire extinguishers and -2 determine the total manufacturing cost per unit (direct material, direct labor, and overhead cost) for the Home and Commercial fire extinguishers. The cost driver for: Receiving is pounds; Forming is machine hours; Assembling is number of parts; Testing is number of tests; Painting is number of gallons; and Packing and Shipping is pounds. C. Describe the activity pool categories as value-­‐added or non-­‐value added. D. In comparing the per unit costs under traditional normal costing and the per unit costs under activity based costing, what advantage has been gained by using activity based costing?