Question

Homework 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 Machining Setups Overhead Cost $ 454,000 303,000 230,800 $ 987,008 $ 182,000 232,eee 61,ee8 $ 475,ee0 Driver Number of batches Machine hours Number of setups Quantity 730 8,440 160 Finishing Welding Inspecting Rework Welding hours Number of inspections Rework orders 5,800 835 220 Support Purchasing Providing space Providing utilities $141,000 36,000 69,eea $ 246,000 Purchase orders Number of units Number of units 477 4,61e 4,618 Additional production information concerning its two product lines follows. ences Model 212 Model 145 1,see 2,600 365 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 3,11e 3, 200 365 368 5,298 8e 6e 475 3,15e 8e 168 318 159 Required: 1. Determine partmental overhead rates and compute the overhesd 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 d rect materials costs per unit are $270 for Model 145 and $160 for Model 212 3. If the market price for Model 145 is $1,250 and the market price for Model 212 is $250, determine the profit or loss per unit for each model

Answer 1

Solution 1:

Computation of Departmental Overhead rates and overhead cost per unit
Department	Overhead cost	Allocation Base	Qty of allocation base	Overhead rate	Model 145		Model 212
					Activity Driver	Allocated Overhead cost	Activity Driver	Allocated Overhead cost
Components	$987,000.00	Machine hours	8440	$116.94	3150	$368,371	5290	$618,629
Finishing	$475,000.00	Welding hours	5800	$81.90	2600	$212,931	3200	$262,069
Support	$246,000.00	Purchase orders	477	$515.72	318	$164,000	159	$82,000
Total						$745,302		$962,698
Nos of units						1500		3110
Overhead cost per unit						$496.87		$309.55

Solution 2:

Computation of Per unit Cost
Particulars	Model 145	Model 212
Direct material and labor	$270.00	$160.00
Overhead cost per unit	$496.87	$309.55
Cost per unit	$766.87	$469.55

Solution 3:

Computation of Profit (Loss) per unit
Particulars	Model 145	Model 212
Selling price per unit	$1,250.00	$260.00
Cost per unit	$766.87	$469.55
Profit (Loss) per unit	$483.13	-$209.55