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	Overhead Cost				Driver	Quantity
Components	Changeover		$	586,950		Number of batches	910
	Machining			349,758		Machine hours	7,620
	Setups			288,800		Number of setups	160
			$	1,225,508
Finishing	Welding		$	370,980		Welding hours	5,400
	Inspecting			323,700		Number of inspections	830
	Rework			66,300		Rework orders	260
			$	760,980
Support	Purchasing		$	181,220		Purchase orders	533
	Providing space			30,400		Number of units	5,100
	Providing utilities			68,030		Number of units	5,100
			$	279,650

   
Additional production information concerning its two product lines follows.

Model 145			Model 212
Units produced		1,700			3,400
Welding hours		1,600			3,800
Batches		455			455
Number of inspections		460			370
Machine hours		2,350			5,270
Setups		80			80
Rework orders		140			120
Purchase orders		355			178

  
Required:
1. Using ABC, compute the overhead cost per unit for each product line.

Model 145 Model 212 Activity Expected Costs Expected Activity Activity Rate Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned Components Changeover $586,950 910 Number of batches Machining 349,758 7,620 Machine hours Setups 288,800 160 Setups Finishing Welding $370,980 5,400 Welding hours Inspecting 323,700 830 Inspections Rework 66,300 260 Rework orders Support Purchasing $181,220 533 Purchase orders Providing space and utilities 98,430 5,100 Units Total overhead cost Total units produced Overhead cost per unit

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $230 for Model 145 and $119 for Model 212. (Round your final answers to 2 decimal places.)

	Model 145 Model 212 Materials and Labor per unit Overhead cost per unit Total cost per unit

If the market price for Model 145 is $833.13 and the market price for Model 212 is $484.70, determine the profit or loss per unit for each model. (Round your final answers to 2 decimal places.)

	Model 145 Model 212 Price per unit Cost per unit Profit (loss) per unit

Answer 1

Required:1 Model 145 Model 212 Activity Drive incurred Overhead assigned Activity Drive incurred Overhead assigned Expected Costs Expected Activity Activity Rate 586950 349758 2888001 910 Number of batches 7620 Machine hours 160 Number of setups 645.00 Per batch 45.90 Per Machine hour 1805.00 Per Setup 455 2350 80 293475 107865 144400 455 5270 801 293475 241893 144400 Activity Components: Change over Machining Setups Finishing: Welding Inspecting Rework Support: Purchasing Provide utilities 370980 323700 66300 5400 Welding hours 830 Number of inspections 260 Rework orders 68.70 Per Welding hour 390.00 Per Inspection 255.00 Per rework order 1600 460 1401 109920 179400 35700 3800 370 1201 261060 144300 30600 181220 98430 533 Purchase orders 5100 Number of units 355 1700 178 3400 340.00 Per Purchase order 19.30 Per unit Total over head cost Total units produced Over head cost per unit 120700 32810 1024270 1700 602.51 60520 6 5620 1241868 3400 365.26

Required :2 Materials and labor per unit Over head per unit Total cost Model 145 Model 212 230.00 119.00 602.51 365.26 832.51 484.26 Required :3 Price per unit Cost per unit Profit (loss ) Per Unit Model 145 Model 212 484.70 832.51 484.26 0.62 0.44