Reference no: EM132463246

FireOut Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers:

Point (1) a home fire extinguisher and

Point (2) a commercial fire extinguisher.

• The home model is a high-volume (64,000 units), half-litre cylinder that holds 2.5 kilograms of multi-purpose dry chemical at 480 PSI (pounds per square Inch). The commercial model is a low-volume (11,065 units), two-litre cylinder that holds 10 kilograms of multi-purpose dry chemical at 390 PSI. Both products require 2.00 hours of direct labour for completion. Therefore, total annual direct labour hours are 150,130 or [2.00 hrs. x (64,000 + 11,065)]. Estimated annual manufacturing overhead is $1,501,300. Thus, the predetermined overhead rate is $10.00 or ($1,501,300 + 150,130) per direct labour hour. The direct materials cost per unit is $18.62 for the home model and $26.28 for the commercial model. The direct labour cost is $20.20 per unit for both the home and commercial models.

The company's managers identified six activity cost pools and related cost drivers, and estimated overhead by cost pool as follows: