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		$	456,000		Number of batches	810
	Machining			301,800		Machine hours	7,620
	Setups			229,000		Number of setups	60
			$	986,800
Finishing	Welding		$	180,600		Welding hours	4,600
	Inspecting			223,000		Number of inspections	765
	Rework			61,750		Rework orders	240
			$	465,350
Support	Purchasing		$	135,500		Purchase orders	548
	Providing space			31,250		Number of units	6,300
	Providing utilities			60,840		Number of units	6,300
			$	227,590

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		2,100			4,200
Welding hours		1,800			2,800
Batches		405			405
Number of inspections		500			265
Machine hours		2,270			5,350
Setups		30			30
Rework orders		120			120
Purchase orders		365			183

  
Required:

1. Using a plantwide overhead rate based on machine hours, computer 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 $290 for Model 145 and $210 for Model 212.

Model 145 and Model 212

3. If the market price for Model 145 is $746 and the market price for Model 212 is $480, determine the profit or loss per unit for each model.

Answer 1

Working Notes: 1
	Calculation of total Overhead
	Process Components	$                                    986,800
	Finishing	$                                    465,350
	Support	$                                    227,950
	Total	$                                1,680,100
Solution: 1
	Calculation Of Predetermined Overhead rate:
	Predtermined Overhead =	Total Estiamted Manufacturing Overhead	"/" By	Total Estimated Machine Hours
	Predtermined Overhead =	$                                1,680,100	"/" By	7,620
	Predtermined Overhead =	$                                      220.49	Per Machine Hours
Solution: 2
	Calculation of Total Cost Per Unit
		Model 145	Model 212
	Particulars	Amount in $	Amount in $
	Direct Materials & Direct Labor	$                                    609,000	$                      882,000
		(2100 X $ 290)	(4200 X $ 210)
	Overhead Cost	$                                    500,502	$                   1,179,598
		(2270 MH X $ 220.49)	(5350 MH X $ 220.49)
	Total Cost	$                                1,109,502	$                   2,061,598
	Divide By No. of Units	2,100	4,200
	Cost Per Unit	$                                      528.33	$                         490.86
Solution: 3
	Calculation of Profit / Loss Per Unit
		Model 145	Model 212
	Sales Per Unit	$                                      746.00	$                         480.00
	Less: Cost Per Unit	$                                      528.33	$                         490.86
	Profit /Loss Per Unit	$                                      217.67	$                         (10.86)