Question

P Homework fed Way Cool produces two diferent 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 associsted with these two manufacturing processes and the production support process follow Process Activity Components Changeover Machining Setups Overfhead Cost $471,750 391,248 292,880 $1,155,798 Driver Nmber of batches Machine hours Quantity 850 8,580 160 Number of setups Finishing $ 278,760 361,425 57,200 $ 697,385 Melding Inspecting Rework Welding hours Number of inspections Rework orders 4,600 915 260 Support Purchasing Providing space Providing utilities $ 186, 320 3e,400 111,350 Purchase orders Nunber of units Nunber of units 548 7,50e 7,500 $ 328,070 Additional production information concerning its two product lines follows. mces Model 212 5,e00 3,200 Model 145 Units produced Welding hours Batches Number of inspections Machine hours 2,58e 1,400 425 515 3,250 425 40e 5,330 80 130 183 Setups Rework orders Purchase orders 80 13e 365 Required: 1. Using ABC. compute the overhead cost per unit for each product ine 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $200 for Model 145 and $118 for Model 212 3. If the market price for Model 145 is $608.16 and the market price for Model 212 is $350.91, determine the profit or loss per unit for each model.

Answer 1

Solution 1:

Allocation of overhead and computation of overhead cost per unit - ABC
Activity	Expected cost	Activity Base	Expected Activity	Activity Rate	Model 145		Model 212
					Activity Driver incurred	Overhead assigned	Activity Driver incurred	Overhead assigned
Component:
Changeover	$471,750.00	Nos of batches	850	$555.00	425	$235,875.00	425	$235,875.00
Machining	$391,248.00	Machine hours	8580	$45.60	3250	$148,200.00	5330	$243,048.00
Setup	292800.00	Nos of setups	160	$1,830.00	80	$146,400.00	80	$146,400.00
Finishing:
Welding	278760.00	Welding hours	4600	$60.60	1400	$84,840.00	3200	$193,920.00
Inspecting	361425.00	Nos of inspections	915	$395.00	515	$203,425.00	400	$158,000.00
Rework	57200.00	Rework orders	260	$220.00	130	$28,600.00	130	$28,600.00
Support:
Purchasing	186320.00	Purchase orders	548	$340.00	365	$124,100.00	183	$62,220.00
Providing space and utilities	141750.00	Nos of units	7500	$18.90	2500	$47,250.00	5000	$94,500.00
Total	$2,181,253.00					$1,018,690.00		$1,162,563.00
Nos of units						2500		5000
Overhead cost per unit						$407.48		$232.51

Solution 2:

Computation of Per unit Cost
Particulars	Model 145	Model 212
Direct material and labor	$200.00	$118.00
Overhead cost per unit	$407.48	$232.51
Cost per unit	$607.48	$350.51

Solution 3:

Computation of Profit (Loss) per unit
Particulars	Model 145	Model 212
Selling price per unit	$608.16	$350.91
Cost per unit	$607.48	$350.51
Profit (Loss) per unit	$0.68	$0.40