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		$	460,000		Number of batches	730
	Machining			311,000		Machine hours	8,470
	Setups			229,000		Number of setups	160
			$	1,000,000
Finishing	Welding		$	188,000		Welding hours	4,800
	Inspecting			228,000		Number of inspections	870
	Rework			61,000		Rework orders	190
			$	477,000
Support	Purchasing		$	135,000		Purchase orders	525
	Providing space			36,000		Number of units	4,830
	Providing utilities			62,000		Number of units	4,830
			$	233,000

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,800			3,030
Welding hours		1,800			3,000
Batches		365			365
Number of inspections		480			390
Machine hours		3,150			5,320
Setups		80			80
Rework orders		150			40
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 $190 for Model 145 and $190 for Model 212.
3. If the market price for Model 145 is $1,475 and the market price for Model 212 is $290, determine the profit or loss per unit for each model.

Answer 1