Question

Exercise 04-8 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 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	Overhead Cost				Driver	Quantity
Components	Changeover		$	454,000		Number of batches	870
	Machining			301,200		Machine hours	7,490
	Setups			227,000		Number of setups	200
			$	982,200
Finishing	Welding		$	180,200		Welding hours	5,400
	Inspecting			232,000		Number of inspections	870
	Rework			61,650		Rework orders	160
			$	473,850
Support	Purchasing		$	137,000		Purchase orders	465
	Providing space			31,800		Number of units	4,200
	Providing utilities			60,980		Number of units	4,200
			$	229,780

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,400			2,800
Welding hours		2,200			3,200
Batches		435			435
Number of inspections		520			350
Machine hours		2,290			5,200
Setups		100			100
Rework orders		110			50
Purchase orders		310			155

Required:

1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line. Overhead costs $982,200 $131.13 per direct labor dollar Machine hours 7,490 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $280 for Model 145 and $160 for Model 212. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Model 145 2 $0 Model 212 $0 Model 145 Model 212 0 3. If the market price for Model 145 is $753 and the market price for Model 212 is $440, determine the profit or loss per unit for each model. Model 145 Model 212 Market price

Answer 1

solution 1:

Overhead cost	$1,685,830.00	$225.08	Plant wide overhead rate per direct labor hour
Machine hours	7490
Overhead Assigned	Activity Driver	Plantwide overhead rate	Total overhead cost	Units Produced	OH cost per unit
Model 145	2290	$225.08	$515,433	1400	$368.17
Model 212	5200	$225.08	$1,170,416	2800	$418.01

Solution 2:

Computation of Per unit Cost
Particulars	Model 145	Model 212
Direct material and labor	$280.00	$160.00
Overhead cost per unit	$368.17	$418.01
Cost per unit	$648.17	$578.01

Solution 3:

Computation of Profit (Loss) per unit
Particulars	Model 145	Model 212
Selling price per unit	$753.00	$440.00
Cost per unit	$648.17	$578.01
Profit (Loss) per unit	$104.83	-$138.01