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.

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 Total units produced ? ? Overhead cost per unit ? ?

Required2.

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

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

							Model 145		model 212
Activity		Expected	Expected activity		Activity rate		Activity	oh	Activity	oh
		costs					driver	assigned	driver	assigned
Components
Changeover		468,950	830	no batches	565	no batches	415	234475	415	234475
Machining		392,238	8,490	MH's	46.2	MH's	3,150	145530	5,340	246708
Setups		109,800	60	no setups	1830	no setups	30	54900	30	54900
Finishing
Welding		315,360	5,400	welding hrs	58.4	welding hrs	1,600	93440	3,800	221920
Inspecting		333,750	890	no inspections	375	no inspections	490	183750	400	150000
Rework		28,000	140	Re orders	200	Re orders	70	14000	70	14000
Support
Purchasing		165,230	533	pur orders	310	pur orders	355	110050	178	55180
providing space&yutilit		108,870	5,700	no units	19.1	no units	1,900	36290	3,800	72580
		1,922,198				total oh		872435		1049763
						units produced		1,900		3,800
						oh cost per unit		459.18		276.25
				model 145	model 212
2)
	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
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