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	Overhead Cost				Driver	Quantity
Components	Changeover		$	458,000		Number of batches	750
	Machining			300,600		Machine hours	7,700
	Setups			227,000		Number of setups	100
			$	985,600
Finishing	Welding		$	180,300		Welding hours	3,600
	Inspecting			221,000		Number of inspections	795
	Rework			60,250		Rework orders	190
			$	461,550
Support	Purchasing		$	137,500		Purchase orders	503
	Providing space			31,450		Number of units	4,800
	Providing utilities			60,530		Number of units	4,800
			$	229,480

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,600			3,200
Welding hours		1,400			2,200
Batches		375			375
Number of inspections		490			305
Machine hours		2,300			5,400
Setups		50			50
Rework orders		100			90
Purchase orders		335			168

1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line. 0 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 $150 for Model 212. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Model 145 $0 Model 212 $0 Model 145 Model 212 0 3. If the market price for Model 145 is $742 and the market price for Model 212 is $460, determine the profit or loss per unit for each model. Model 145 Model 212 Market price

Answer 1

Answer

• Requirement 1, 2 and 3

1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line.
Total Overhead	$1,676,630	$217.74	per machine hour
Total machine hours	7,700
2
Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Units Produced	OH Cost per unit
Model 145	2,300	$ 217.74	$         500,802.00	1,600	$      313.00
Model 212	5,400	$ 217.74	$      1,175,796.00	3,200	$      367.44
		Model 145	Model 212
Direct material and Direct Labor cost		$ 200.00	$               150.00
Overhead cost per unit		$ 313.00	$               367.44
Total Cost per unit		$ 513.00	$               517.44
3
		Model 145	Model 212
Market price		$ 742.00	$                     460.00
Total Cost per unit		$ 513.00	$                     517.44
Profit (Loss) per unit		$ 229.00	$                     (57.44)