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		$	476,000		Number of batches	890
	Machining			306,000		Machine hours	7,730
	Setups			231,000		Number of setups	20
			$	1,013,000
Finishing	Welding		$	186,000		Welding hours	4,600
	Inspecting			226,000		Number of inspections	835
	Rework			62,500		Rework orders	180
			$	474,500
Support	Purchasing		$	143,000		Purchase orders	531
	Providing space			35,500		Number of units	5,170
	Providing utilities			63,000		Number of units	5,170
			$	241,500

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		2,100			3,070
Welding hours		1,600			3,000
Batches		445			445
Number of inspections		465			370
Machine hours		2,450			5,280
Setups		10			10
Rework orders		80			100
Purchase orders		354			177

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 $250 for Model 145 and $160 for Model 212.
3. If the market price for Model 145 is $1,925 and the market price for Model 212 is $310, determine the profit or loss per unit for each model.

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.)

Show more

	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

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $160 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

If the market price for Model 145 is $1,925 and the market price for Model 212 is $310, 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

Answer 1

Department	Components	Finishing	Support
Allocated based on	Machine hours	Welding hours	Purchase orders
Departmental overhead cost	1013000	474500	241500
Applicable factor in numbers	7730	4600	531
Departmental overhead rate (departmental overhead cost / applicable factor in numbers)	131.05	103.15	454.80
Model 145	Activity driver	Departmental overhead rate	Total overhead cost
Components	2450	131.05	321072.50
Finishing	1600	103.15	165040.00
Support	354	454.80	160999.20
Total overhead allocated			647111.70
Number of units			2100
Overhead cost per unit. (Total overhead allocated / Number of units)			308.15
Model 212	Activity driver	Departmental overhead rate	Total overhead cost
Components	5280	131.05	691944.00
Finishing	3000	103.15	309450.00
Support	177	454.80	80499.60
Total overhead allocated			1081893.60
Number of units			3070
Overhead cost per unit. (Total overhead allocated / Number of units)			352.41
	Model 145	Model 212
Material and labor cost per unit	250	160
Overhead cost per unit	308.15	352.41
Total cost per unit	558.15	512.41
	Model 145	Model 212
Market price per unit	1925	310
Less: cost per unit	558.15	512.41
Profit (Loss) per unit	$ 1,366.85	$ (202.41)