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.

Process	Activity	Overhead Cost				Driver	Quantity
Components	Changeover		$	477,950		Number of batches	790
	Machining			391,704		Machine hours	8,590
	Setups			74,400		Number of setups	40
			$	944,054
Finishing	Welding		$	380,900		Welding hours	6,500
	Inspecting			285,600		Number of inspections	840
	Rework			56,700		Rework orders	210
			$	723,200
Support	Purchasing		$	194,400		Purchase orders	540
	Providing space			31,400		Number of units	4,800
	Providing utilities			57,880		Number of units	4,800
			$	283,680

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,600			3,200
Welding hours		2,600			3,900
Batches		395			395
Number of inspections		510			330
Machine hours		3,250			5,340
Setups		20			20
Rework orders		110			100
Purchase orders		360			180

  
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 $118 for Model 212.
3. If the market price for Model 145 is $777.58 and the market price for Model 212 is $434.53, determine the profit or loss per unit for each model.

Thank you for your help!

Answer 1