Question

Exercise 17-7 Using the plantwide overhead rate to assess prices LO P1 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.) Quantity 790 Process Activity Components Changeover Machining Setups 7,570 80 Finishing Welding Inspecting Rework Overhead Cost Driver $ 458,500 Number of batches 300,200 Machine hours 227,000 Number of setups $ 985, 700 $ 181,800 Welding hours 233,000 Number of inspections 61,650 Rework orders $ 476,450 $ 135,000 Purchase orders 31,650 Number of units 60, 180 Number of units $ 226,830 3,600 815 150 Support Purchasing Providing space Providing utilities 488 5,100 5, 100

Answer 1

Activity	Expected Costs	Expected Activity		Activity Rate		Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
Components
Changeover	$458,500	790	Number of batches	$580.38	per batch	395	$229,250	395	$229,250.00
Machining	300,200	7,570	Machine hours	$39.66	per machine hour	2,320	$92,003	5,250	$208,196.83
Setups	227,000	80	Setups	$2,837.50	Per Setup	40	$113,500	40	$113,500.00
Finishing
Welding	$181,800	3,600	Welding hours	$50.50	per welding hour	1600	$80,800	2000	$101,000.00
Inspecting	233,000	815	Inspections	$285.89	per inspection	525	$150,092	290	$82,907.98
Rework	61,650	150	Rework orders	$411.00	Per rework order	110	$45,210	40	$16,440.00
Support
Purchasing	$135,000	488	Purchase orders	$276.64	per purchase order	325	$89,908	163	$45,092.21
Providing space and utilities	91,830	5,100	Units	$18.01	Per unit	1,700	$30,610	3400	$61,220.00
					Total overhead cost		$831,373		$857,607
					Total units produced		1,700		3,400
					Overhead cost per unit		$489.04		$252.24

2
	Model 145	Model 212
Materials and Labor per unit	250.00	190.00
Overhead per unit	489.04	252.24
Total cost per unit	739.04	442.24
3
	Model 145	Model 212
Price per unit	736.00	440.00
Cost per unit	739.04	442.24
Profit (loss) per unit	(3.04)	(2.24)