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. Process Activity Components Changeover Machining Setups Driver Number of batches Machine hours Number of setups Quantity 750 8,600 200 Finishing Welding Inspecting Rework Overhead Cost $ 480,000 309,000 233,000 $1,022,000 $ 186,000 222,000 64,000 $ 472,000 $ 141,000 32,000 62,000 $ 235,000 Welding hours Number of inspections Rework orders 6,200 785 180 Support Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 495 5,030 5,030

Answer 1

Answers

• [1]

Components:
Overhead costs	$ 1,022,000.00	118.84	per machine hour
Machine hours	8,600
Finishing:
Overhead costs	$      472,000.00	76.13	per weilding hour
Weilding hours	6,200
Support:
Overhead costs	$      235,000.00	474.75	per purchase order
Purchase orders	495
Model 145	Activity Driver	Departmental OH rate	Total Overhead cost
Components	3250	$          118.84	$      386,230.00
Finishing	2200	$            76.13	$      167,486.00
Support	330	$          474.75	$      156,667.50
			$      710,383.50
		Units	2000
		Overhead cost per unit	$              355.19
Model 212	Activity Driver	Departmental OH rate	Total Overhead cost
Components	5350	$          118.84	$      635,794.00
Finishing	4000	$            76.13	$      304,520.00
Support	165	$          474.75	$        78,333.75
			$ 1,018,647.75
		Units	3030
		Overhead cost per unit	$              336.19

• [2]

Working		Model 145	Model 212
A	Material & Labor per unit	$          230.00	$                    130.00
B	Overhead cost per unit	$          355.19	$                    336.19
C = A + B	Total Cost per unit	$          585.19	$                    466.19

• [3]

Working		Model 145	Model 212
A	Price per unit	$      1,325.00	$                    320.00
B	Cost per unit	$          585.19	$                    466.19
C = A - B	Profit (Loss) per unit	$          739.81	$                 (146.19)