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.

Process	Activity	Overhead Cost				Driver	Quantity
Components	Changeover		$	470,000		Number of batches	770
	Machining			309,000		Machine hours	8,490
	Setups			227,000		Number of setups	160
			$	1,006,000
Finishing	Welding		$	182,000		Welding hours	5,800
	Inspecting			234,000		Number of inspections	795
	Rework			61,000		Rework orders	170
			$	477,000
Support	Purchasing		$	145,000		Purchase orders	489
	Providing space			37,000		Number of units	4,910
	Providing utilities			63,000		Number of units	4,910
			$	245,000

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,900			3,010
Welding hours		2,200			3,600
Batches		385			385
Number of inspections		485			310
Machine hours		3,150			5,340
Setups		80			80
Rework orders		80			90
Purchase orders		326			163

Required:
1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $290 for Model 145 and $160 for Model 212.
3. If the market price for Model 145 is $875 and the market price for Model 212 is $260, determine the profit or loss per unit for each model.

Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders. (Round your intermediate calculations and per unit cost answers to 2 decimal places.

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $290 for Model 145 and $160 for Model 212. (Round your intermediate calculations and cost per unit answers to 2 decimal places.) Model 145 Model 212 Materials and Labor per unit Overhead cost per unit Total cost per unit

Answer 1

Answers

• Requirement 1

Components:
Overhead costs	$           1,006,000.00	118.49	per machine hour
Machine hours	8,490
Finishing:
Overhead costs	$              477,000.00	82.24	per weilding hour
Weilding hours	5,800
Support:
Overhead costs	$              145,000.00	296.52	per purchase order
Purchase orders	489
Model 145	Activity Driver	Departmental OH rate	Total Overhead cost
Components	3150	$              118.49	$          373,243.50
Finishing	2200	$                 82.24	$          180,928.00
Support	326	$              296.52	$            96,665.52
			$          650,837.02
		Units	1900
		Overhead cost per unit	$                  342.55
Model 212	Activity Driver	Departmental OH rate	Total Overhead cost
Components	5340	$              118.49	$          632,736.60
Finishing	3600	$                 82.24	$          296,064.00
Support	163	$              296.52	$            48,332.76
			$          977,133.36
		Units	3010
		Overhead cost per unit	$                  324.63

• Requirement 2

Working		Model 145	Model 212
A	Material & Labor per unit	$              290.00	$                  160.00
B	Overhead cost per unit	$              342.55	$                  324.63
C = A + B	Total Cost per unit	$              632.55	$                  484.63

• Requirement 3

Working		Model 145	Model 212
A	Price per unit	$              875.00	$                 260.00
B	Cost per unit	$              632.55	$                  484.63
C = A - B	Profit (Loss) per unit	$              242.45	$                (224.63)