Question

Ch. 17 Quiz Help Saved 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 Components Changeover Overhead Cost Driver Quantity Machining Setups $465,750 380,786 110.100 Number of batches Machine hours Number of setups 810 8,260 60 $956,636 $294,000 328,500 42,000 $664,500 $ 181,050 30,200 36,400 $247,650 4,900 900 140 Finishing Welding Inspecting Rework Welding hours Number of inspections Rework orders Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 510 3,600 3,600 Support Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 1,200 1,000 405 500 2,950 30 90 340 2,400 3,900 405 400 5,310 30 50 170 Required

Answer 1

1) Calculate overhead rates :			Total overheads /Machine hours
Components department			956636/8260		$ 115.82
Finishing department			664500/8260		$    80.45
Support department			247650/8260		$    29.98
Model 145	Activity driver	Departmental OH rate	Machine hours	Total OH cost
Components department	Machine hours	$                             115.82	2950	$      341,655.71
Finishing department	Machine hours	$                               80.45	2950	$      237,321.43
Support department	Machine hours	$                               29.98	2950	$        88,446.43
				$      667,423.57
Total cost per unit = 667423.57/1200		$                             556.19
Model 212	Activity driver	Departmental OH rate	Machine hours	Total OH cost
Components department	Machine hours	$                             115.82	5310	$      614,980.29
Finishing department	Machine hours	$                               80.45	5310	$      427,178.57
Support department	Machine hours	$                               29.98	5310	$      159,203.57
				$ 1,201,362.43
Total cost per unit = 667423.57/1200		$                             500.57
2) Calculation total cost per unit of each product :
	Model 145	Model 212
Material and labour per unit	$            210.00	$                             115.00
Overhead per unit	$            556.19	$                             500.57
	766.19	615.57
3) Calculation of profit/(loss)
	Model 145	Model 212
Market price per unit	$            907.56	$                             545.53
Cost per unit	$          (766.19)	$                           (615.57)
Profit / (loss)	$            141.37	$                             (70.04)