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. (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 Components changeover Machining Setups inishing 4.300 Welding Inspecting Rework erhead Cost Driver $ 454,000 Number of batches 301.600 Machine hours 229.000 Number of setups $ 984.600 $11.900 Welding hours 233,000 Number of inspecti 62,000 Rework orders $ 476.900 $ 137,500 Purchase orders 31.850 Number of units 60.440 Number of units 229,790 Support Purchasing Providing space Providing utilitie 4.500 Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders

Answer 1

Answers

• [1]

1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line.
Total Overhead	$1,691,290	$                        221.66	per machine hour
Total machine hours	7,630

• [2]

Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Units Produced	OH Cost per unit
Model 145	2,280	$                         224.31	$                511,426.80	1,500	$        340.95
Model 212	5,350	$                         224.31	$             1,200,058.50	3,000	$        400.02

	Model 145	Model 212
Direct material and Direct Labor cost	$                         250.00	$                      160.00
Overhead cost per unit	$                         340.95	$                      400.02
Total Cost per unit	$                         590.95	$                      560.02

• [3]

	Model 145	Model 212
Market price	$                                  734.00	$                              450.00
Total Cost per unit	$                                  590.95	$                              560.02
Profit (Loss) per unit	$                                  143.05	$                            (110.02)