Question

Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.)

Process	Activity	Overhead Cost				Driver	Quantity
Components	Changeover		$	458,500		Number of batches	750
	Machining			301,400		Machine hours	7,550
	Setups			226,500		Number of setups	180
			$	986,400
Finishing	Welding		$	182,400		Welding hours	4,700
	Inspecting			224,000		Number of inspections	760
	Rework			60,500		Rework orders	230
			$	466,900
Support	Purchasing		$	134,000		Purchase orders	473
	Providing space			31,000		Number of units	6,000
	Providing utilities			60,090		Number of units	6,000
			$	225,090

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		2,000			4,000
Welding hours		2,400			2,300
Batches		375			375
Number of inspections		500			260
Machine hours		2,300			5,250
Setups		90			90
Rework orders		110			120
Purchase orders		315			158

  
Required:

Answer 1

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Way Cool	Answer 1
Calculation of ABC rates for overhead			A	B	C=B/A
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Components	Changeover	Number of batches	458,500.00	750.00	611.33
	Machining	Machine hours	301,400.00	7,550.00	39.92
	Setups	Number of Setups	226,500.00	180.00	1,258.33
	Total Cost assigned		986,400.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Finishing	Welding	Welding hours	182,400.00	4,700.00	38.81
	Inspecting	Number of inspections	224,000.00	760.00	294.74
	Rework	Rework orders	60,500.00	230.00	263.04
	Total Cost assigned		466,900.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Support	Purchasing	Purchase orders	134,000.00	473.00	283.30
	Providing space	Number of units	31,000.00	6,000.00	5.17
	Providing utilities	Number of units	60,090.00	6,000.00	10.02
	Total Cost assigned		225,090.00

			See C	D	D=C*D	E	F=C*E
	Allocation table			Model 145		Model 212
Process	Activity cost pool	Cost Driver	ABC Rates	Activity used	Cost assigned	Activity used	Cost assigned
Components	Changeover	Number of batches	611.33	375.00	229,248.75	375.00	229,248.75
	Machining	Machine hours	39.92	2,300.00	91,816.00	5,250.00	209,580.00
	Setups	Number of Setups	1,258.33	90.00	113,249.70	90.00	113,249.70
Finishing	Welding	Welding hours	38.81	2,400.00	93,144.00	2,300.00	89,263.00
	Inspecting	Number of inspections	294.74	500.00	147,370.00	260.00	76,632.40
	Rework	Rework orders	263.04	110.00	28,934.40	120.00	31,564.80
Support	Purchasing	Purchase orders	283.30	315.00	89,239.50	158.00	44,761.40
	Providing space	Number of units	5.17	2,000.00	10,340.00	4,000.00	20,680.00
	Providing utilities	Number of units	10.02	2,000.00	20,040.00	4,000.00	40,080.00
	Total Cost assigned				823,382.35		855,060.05	G
	Number of units				2,000.00		4,000.00	H
	Overhead cost per unit				411.69		213.77	I=G/H