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 Components Changeover Machining Setups Quantity 750 7,740 200 Finishing Welding Inspecting Rework Overhead Cost Driver $458,500 Number of batches 300, 400 Machine hours 229,000 Number of setups $987,900 $189,800 Welding hours 235,000 Number of inspections 62,000 Rework orders $477,800 $135,500 Purchase orders 32,450 Number of units 60, 050 Number of units 4, 8ee 780 250 Support Purchasing Providing space Providing utilities 525 5, 100 5,100 $228,000

Answer 1

Above question is about determination of overhead rate and application of overhead cost for a particular model. Refer the below images for the more detailed solution.

Requirement : In case of a plant wide overhead rate method, the overhead rate is caluated by dividing the total overhead costs involved in production with the allocation bare such as the total direct labor hours reapired to produce products This rate is then used to calculate the overhead costs invol n produling a particular product by multiplying this overhead rate with the total direct labor hours required to prodot particular product that produce to required Here the allocation base as Here total budgeted overhead $ 477800 + $ 228006] . Toral +740 plant overhead asuced in question is machine hoors. cort is $ 1693700 [ie, $ 9 87 900 t budgeted machine hours is given Yare can be Calwlated as follows: plant overneed rate = Total Budgeted overhead colt Toral Budgeted Machine hours $ 1693700 7740 $218.82 * For Model 145: plant-wide overhead rate = 1218-82 Machine hours (MH) - 2290 units produced (up) : Model 146) = & overhead rore (For plant wide Machine t ott. rate & Units produced - $218.82 * 2290 1700 -$294.76 the o.lt-rate cost per unit of model 145 is $294.76

& For Model 212 : plant wide overhead rate 2$218-82 Machine hours = 5450 Units produced - 3400 : overhead rate (for Units produced model 212) - plant wide & Machine hool OH-rate - $218.82 X5450 3400 1350.76 per onit of model 212 is $ 350.76. in the overhead cost Requirement : & For model 145: Direct labor y Material costs overhead cost per unit (liven in problem) per unit = 8290 & 294.76 cost Total cost per onit of = model 145 Direct labor y Material & overhead cost = $290 + $ 294.76 -9584-76 The total cost per unit of Model 145 is $ 584076 For model 212 : Direct labor y Material costs per unit (DC) = I 150 (liven) overhead cost per unit (oc) & 350.76 Total cost per unit of model 212 = Detoc. = $ 150+ & 350.76 - & 500-76 . The total cost per unit of Hodel 212 is $500.76

Requirement © : & For model 145: Market price Total cost per per unit (MP) - $ 733 unit (IC) = $584.76 Total profit from n Hodel 145 per Model 145 per unit unit - Market price - Toral cost - 4753 - $ 534.76 a $ 168.24 from model 145 per unit is $168.24. :. The total profit & For model 212 : Marilet price per unit (Mp) - $ 500 Total cost per unit (c) & $ 500.76 Total profit from model 212 per whit = mp-se = $500 - $ 5ooo76 = - 80.76 . The total loss from model 212 per unit is $ 0.76.