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 $ 455,500 Number of batches 810 Machining 301,200 Machine hours 7,610 Setups 225,500 Number of setups 200 $ 982,200 Finishing Welding $ 182,200 Welding hours 4,800 Inspecting 233,000 Number of inspections 800 Rework 60,100 Rework orders 290 $ 475,300 Support Purchasing $ 137,000 Purchase orders 473 Providing space 30,650 Number of units 5,700 Providing utilities 60,120 Number of units 5,700 $ 227,770 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced 1,900 3,800 Welding hours 1,600 3,200 Batches 405 405 Number of inspections 490 310 Machine hours 2,310 5,300 Setups 100 100 Rework orders 170 120 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	455,500.00	810.00	562.35
	Machining	Machine hours	301,200.00	7,610.00	39.58
	Setups	Number of Setups	225,500.00	200.00	1,127.50
	Total Cost assigned		982,200.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Finishing	Welding	Welding hours	182,200.00	4,800.00	37.96
	Inspecting	Number of inspections	233,000.00	800.00	291.25
	Rework	Rework orders	60,100.00	290.00	207.24
	Total Cost assigned		475,300.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Support	Purchasing	Purchase orders	137,000.00	473.00	289.64
	Providing space	Number of units	30,650.00	5,700.00	5.38
	Providing utilities	Number of units	60,120.00	5,700.00	10.55
	Total Cost assigned		227,770.00
			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	562.35	405.00	227,750.00	405.00	227,750.00
	Machining	Machine hours	39.58	2,310.00	91,428.65	5,300.00	209,771.35
	Setups	Number of Setups	1,127.50	100.00	112,750.00	100.00	112,750.00
Finishing	Welding	Welding hours	37.96	1,600.00	60,733.33	3,200.00	121,466.67
	Inspecting	Number of inspections	291.25	490.00	142,712.50	310.00	90,287.50
	Rework	Rework orders	207.24	170.00	35,231.03	120.00	24,868.97
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