Question

Claude's Port-A-Potties produces two different models of portable toiletry units (Luxury and Standard). Mechanical systems for both toiletry units are made in the components department. Once the mechanical systems are completed, it is combined with the housing assembly in the finishing department. Furthermore, there is also a support department that supports both the components and finishing departments.

The activities, costs, and drivers associated with these two manufacturing processes and the production support process are below:

Process	Activity	Overhead Cost				Driver	Quantity
Components	Changeover		$	475,620		Number of batches	1,930
	Machining			803,634		Machine hours	8,670
	Setups			68,963		Number of setups	200
			$	1,348,217
Finishing	Welding		$	419,700		Welding hours	6,200
	Inspecting			766,945		Number of inspections	705
	Rework			776,312		Rework orders	140
			$	1,962,957
Support	Purchasing		$	263,116		Purchase orders	300
	Providing space			67,100		Number of units	8,600
	Providing utilities			98,204		Number of units	8,600
			$	428,420

Actual production information concerning the two product lines was provided:

	Luxury	Standard
Units produced	3,600	7,000
Welding hours	3,100	8,000
Batches	600	430
Number of inspections	475	350
Machine hours	5,400	8,920
Setups	120	120
Rework orders	165	230
Purchase orders	240	415

***************************************************************************************************************************************************************************************

a. Using the ABC method, determine the overhead cost per unit for both the Luxury and Standard product lines. Round your answers to 2 decimal places.

			Overhead assigned
Activity	Activity Rate		Luxury	Standard
Components
Changeover	per batch
Machining	per machine hour
Setups	per setup
Finishing
Welding	per welding hour
Inspecting	per inspection
Rework	per rework order
Support
Purchasing	per purchase order
Providing space and utilities	per unit
		Total Overhead Costs
		Total Units Produced
		Overhead Cost per Unit

b. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $480 for the Luxury model and $290 for the Standard model. Round your answers to 2 decimal places.

Total cost per unit - Luxury

Total cost per unit - Standard

c. If the market price for the Luxury model is $1,400, and the market price for the Standard model is $1,000, what is the profit or loss per unit for each model? Round your answers to 2 decimal places.

Total Net Profit (Loss) per unit - Luxury

Total Net Profit (Loss) per unit - Standard

Answer 1