Combat fire inc manufactures steel cylinders and nozzles

8. Lewis and Stark is a public accounting firm that offers two primary services, auditing and taxreturn preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year’s budgeted data for purposes of analysis and comparison. The following overhead data are collected to develop the comparison. Part b and c of this question will accessible after part a is submitted 5. 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 multipurpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), twogallon 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 $1,585,316. Thus, the predetermined overhead rate is $16.46 or ($1,585,316 ÷ 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. Part b-d will be accessible after part a is submitted 1. EcoFabrics has budgeted overhead costs of $1,181,250. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 562,500 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $450,000 and $731,250 is allocated to the design cost pool. Additional information related to these pools is as follows. 2. 3) Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 200 pressure gauges were produced, and overhead costs of $87,740 were estimated. An analysis of estimated overhead costs reveals the following activities. 4) Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.