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		$	468,000		Number of batches	770
	Machining			303,000		Machine hours	7,760
	Setups			228,000		Number of setups	120
			$	999,000
Finishing	Welding		$	188,000		Welding hours	6,400
	Inspecting			225,000		Number of inspections	920
	Rework			60,500		Rework orders	210
			$	473,500
Support	Purchasing		$	139,000		Purchase orders	471
	Providing space			37,000		Number of units	4,810
	Providing utilities			69,000		Number of units	4,810
			$	245,000

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,700			3,110
Welding hours		2,400			4,000
Batches		385			385
Number of inspections		520			400
Machine hours		2,450			5,310
Setups		60			60
Rework orders		130			80
Purchase orders		314			157

Required:
1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $220 for Model 145 and $200 for Model 212.
3. If the market price for Model 145 is $800 and the market price for Model 212 is $300, determine the profit or loss per unit for each model.

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

Required 1

Required 2

Required 3

Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders. (Round your intermediate calculations and per unit cost answers to 2 decimal places.)

Required 1.

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	Components department ? ? 0 ? ? ? Finishing department ? ? 0 ? ? ? Support department ? ? 0 ? ? ? Model 145 Activity Driver Departmental OH Rate Total Overhead Cost Components ? ? $0 Finishing ? ? $0 Support ? ? 0 ? ? Model 212 Activity Driver Departmental OH Rate Total Overhead Cost Components ? $0 Finishing ? $0 Support ? 0 ? ?

Required 2.

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $220 for Model 145 and $200 for Model 212. (Round your intermediate calculations and cost per unit answers to 2 decimal places.)

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

Required 3

If the market price for Model 145 is $800 and the market price for Model 212 is $300, determine the profit or loss per unit for each model. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.)

	Model 145 Model 212 Market price per unit ? ? Cost per unit ? ? Profit (loss) per unit ? ?

Note: Please solve the problem completely.

Thank you,

Answer 1

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Part-1
Component Department	Overhead Cost	/	Machine Hour
Overhead Cost	999000		$                             128.74	Per Machine Hour
Machine Hour	7760
Finishing Department	Overhead Cost	/	Welding Hours
Overhead Cost	473500		$                               73.98	Per Welding Hour
Welding Hours	6400
Support Department	Overhead Cost	/	No of Purchase orders
Overhead Cost	245000		$                             520.17	Per Purchase order
No of Purchase orders	471
Model 145	Activity Driver	Departmental Ovh Rate	Total Overhead Cost
Component Department	2450	$                                128.74	$                     315,405.93
Finishing Department	2400	$                                   73.98	$                     177,562.50
Support Department	314	$                                520.17	$                     163,333.33
Total Overhead Cost			$                     656,301.76
Units Produced			$                         1,700.00
Overhead Cost per unit			$                             386.06
Model 212	Activity Driver	Departmental Ovh Rate	Total Overhead Cost
Component Department	5310	$                                128.74	$                     683,594.07
Finishing Department	4000	$                                   73.98	$                     295,937.50
Support Department	157	$                                520.17	$                       81,666.67
Total Overhead Cost			$                 1,061,198.24
Units Produced			$                         3,110.00
Overhead Cost per unit			$                             341.22
Part-2
		Model 145	Model 212
Material and Labor per unit		$                                220.00	$                             200.00
Overhead Cost per unit		$                                386.06	$                             341.22
Total Cost per unit		$                                606.06	$                             541.22
Part-3
		Model 145	Model 212
Market Price per unit		$                                800.00	$                             300.00
Total Cost per unit		$                                606.06	$                             541.22
Profit/(loss) per unit		$                                193.94	$                           -241.22