In: Accounting
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. Process Activity Overhead Cost Driver Quantity Components Changeover $ 476,000 Number of batches 730 Machining 310,000 Machine hours 7,990 Setups 225,000 Number of setups 220 $ 1,011,000 Finishing Welding $ 192,000 Welding hours 5,800 Inspecting 234,000 Number of inspections 790 Rework 64,500 Rework orders 240 $ 490,500 Support Purchasing $ 135,000 Purchase orders 525 Providing space 34,000 Number of units 5,210 Providing utilities 61,000 Number of units 5,210 $ 230,000 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced 2,100 3,110 Welding hours 2,400 3,400 Batches 365 365 Number of inspections 480 310 Machine hours 2,650 5,340 Setups 110 110 Rework orders 170 70 Purchase orders 350 175 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 $280 for Model 145 and $190 for Model 212. 3. If the market price for Model 145 is $1,625 and the market price for Model 212 is $320, determine the profit or loss per unit for each model.
1.
Components Department | |||
Overhead Cost | $1,011,000 | $126.53 | Per Machine Hour |
Machine Hour | 7,990 | ||
Finishing Department | |||
Overhead Cost | $490,500 | $84.57 | Per Welding Hour |
Welding Hours | $5,800 | ||
Support Department | |||
Overhead Costs | $230,000 | $438.10 | Per Welding Hour. |
Number of Purchase Order | $525 |
2.
Model 145 | Activity Driver | Department Overhead Rate | Total Overhead Cost |
Components | 2,650 | $126.53 | $335,305 |
Finishing | 2400 | $84.57 | $202,968 |
Support | 350 | $438.10 | $153,335 |
Total Overheads Cost | $691,608 | ||
Units Produced | 2100 | ||
Overhead Cost Per Unit | $329.34 |
Model 212 | Activity Driver | Department Overhead Rate | Total Overhead Cost |
Components | 5340 | $126.53 | $675,670 |
Finishing | 3400 | $84.57 | $287,538 |
Support | 175 | $438.10 | $76,668 |
Total Overhead Cost | $1,039,876 | ||
Units Produced | 3,110 | ||
Overhead Cost Per Unit | $334.37 |
2.
Model 145 | Model 212 | |
Materials and Labor Per Unit | 280 | 190 |
Overhead Cost Per Unit | $329.34 | $334.37 |
Total Cost Per Unit | $609.34 | $524.37 |
3.
Model 145 | Model 212 | |
Market Price Per Unit | $1,625 | $320 |
Cost Per Unit | $609.34 | $524.37 |
Profit (Loss)Per Unit | $1,015.66 | $(204.37) |