Question

Way Cool produces two different models of air conditioners. The company produces the mechanical systems in their 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.

Process	Activity	Overhead Cost				Driver	Quantity
Components	Changeover		$	468,950		Number of batches	830
	Machining			392,238		Machine hours	8,490
	Setups			109,800		Number of setups	60
			$	970,988
Finishing	Welding		$	315,360		Welding hours	5,400
	Inspecting			333,750		Number of inspections	890
	Rework			28,000		Rework orders	140
			$	677,110
Support	Purchasing		$	165,230		Purchase orders	533
	Providing space			30,600		Number of units	5,700
	Providing utilities			78,270		Number of units	5,700
			$	274,100

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,900			3,800
Welding hours		1,600			3,800
Batches		415			415
Number of inspections		490			400
Machine hours		3,150			5,340
Setups		30			30
Rework orders		70			70
Purchase orders		355			178

  
Required:
1. Using ABC, compute the overhead cost per unit for each product line.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $190 for Model 145 and $116 for Model 212.
3. If the market price for Model 145 is $649.77 and the market price for Model 212 is $392.69, determine the profit or loss per unit for each model.

Complete this question by entering your answers in the tabs below.

Required1:

Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimals places.)

	Model 145 Model 212 Activity Expected Costs Expected Activity Activity Rate Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned Components Changeover $468,950 830 Number of batches ? ? ? Machining 392,238 8,490 Machine hours ? ? ? Setups 109,800 60 Setups ? ? ? Finishing Welding $315,360 5,400 Welding hours ? ? ? Inspecting 333,750 890 Inspections ? ? ? Rework 28,000 140 Rework orders ? ? ? Support Purchasing $165,230 533 Purchase orders ? ? ? Providing space and utilities 108,870 5,700 Units ? ? ? Total overhead cost $0 $0 Total units produced ? ? Overhead cost per unit ? ?

Requred2.

	Model 145 Model 212 Materials and Labor per unit ? ? Overhead cost per unit ? ? Total cost per unit

Quire

Required3.

	Model 145 Model 212 Price per unit ? ? Cost per unit ? ? Profit (loss) per unit ? ?

Note: please solve the problem completely. Thank you.

Answer 1

• Requirement 1

						Model 145		Model 212
Activity	Expected Costs	Expected Activity		Activity Rate		Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
Components
Changeover	$      468,950.00	830	Number of batches	$     565.00	per Number of batches	415	$ 234,475.00	415	$      234,475.00
Machining	$      392,238.00	8,490	Machine hours	$        46.20	per Machine hours	3,150	$ 145,530.00	5,340	$      246,708.00
Setups	$      109,800.00	60	Setups	$ 1,830.00	per Setups	30	$    54,900.00	30	$        54,900.00
Finishing
Welding	$      315,360.00	5,400	Welding hours	$        58.40	per Welding hours	1,600	$    93,440.00	3,800	$      221,920.00
Inspecting	$      333,750.00	890	Inspections	$     375.00	per Inspections	490	$ 183,750.00	400	$      150,000.00
Rework	$        28,000.00	140	Rework orders	$     200.00	per Rework orders	70	$    14,000.00	70	$        14,000.00
Support
Purchasing	$      165,230.00	533	Purchase orders	$     310.00	per Purchase orders	355	$ 110,050.00	178	$        55,180.00
Providing space and utilities	$      108,870.00	5,700	Units	$        19.10	per Units	1,900	$    36,290.00	3,800	$        72,580.00
					Total overhead cost		$ 872,435.00		$ 1,049,763.00
					Total units produced		1,900		3,800
					Overhead cost per unit		$          459.18		$              276.25

• Requirement 2

	Model 145	Model 212
Materials and Labor per unit	$              190.00	$   116.00
Overhead cost per unit	$              459.18	$   276.25
Total cost per unit	$              649.18	$ 392.25

• Requirement 3

	Model 145	Model 212
Price per unit	$              649.77	$   392.69
Cost per unit	$              649.18	$   392.25
Profit (loss) per unit	$                   0.59	$        0.44