Question

Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its 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 Quantity 830 7,550 60 Finishing Welding Inspecting Rework Overhead Cost Driver $ 454,500 Number of batches 301,600 Machine hours 227,500 Number of setups $ 983,600 $ 182,100 Welding hours 223,000 Number of inspections 60,150 Rework orders $ 465, 250 $ 138,000 Purchase orders 30,950 Number of units 60,450 Number of units $ 229,400 4,700 800 200 Support Purchasing Providing space Providing utilities 548 5,400 5,400 Additional production information concerning its two product lines follows.

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	$1,678,250	$                        222.28	per machine hour
Total machine hours	7,550
2

• [2]

Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Units Produced	OH Cost per unit
Model 145	2,300	$                         222.28	$                511,244.00	1,800	$        284.02
Model 212	5,250	$                         222.28	$             1,166,970.00	3,600	$        324.16
		Model 145	Model 212
Direct material and Direct Labor cost		$                         200.00	$                      130.00
Overhead cost per unit		$                         284.02	$                      324.16
Total Cost per unit		$                         484.02	$                      454.16

• [3]

3
	Model 145	Model 212
Market price	$                                  745.00	$                              470.00
Total Cost per unit	$                                  484.02	$                             454.16
Profit (Loss) per unit	$                                  260.98	$                                15.84