Question

Exercise 04-11 Using ABC to assess prices LO P3 Way Cool produces two different models of air conditioners. The company produ
Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of in
Complete this question by entering your answers in the tabs below. Required t equired 2 Required 3 Using ABC, compute the ove
Required: 1. Using ABC, compute the overhead cost per unit for each product line. 2. Determine the total cost per unit for ea
Complete this question by entering your answers in the tabs below. Required 3 Required 3 Required 1 Required 2 If the market
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Answer #1

(1)

Model 145

Model 212

Activity

Expected Costs

Expected Activity

Activity Rate

Activity driver incurred

Overhead assigned

Activity driver incurred

Overhead assigned

Components

Changeover

$514150

910

Number of batches

$565

per batch

455

$257075

455

$257075

Machining

351120

7700

Machine hours

$45.60

per machine hour

2350

107160

5350

$243960

Setups

218400

120

Setups

$1820

per setup

60

109200

60

$109200

Finishing

Welding

$334180

4900

Welding hours

$68.20

per welding hour

1600

109120

3300

$225060

Inspecting

289000

850

Inspections

$340

per inspection

480

163200

370

$125800

Rework

57000

200

Rework orders

$285

per rework order

160

45600

40

$11400

Support

Purchasing

$194545

533

Purchase orders

$365

per purchase order

355

129575

178

$64970

Providing space and utilities

90240

4800

Units

$18.80

per unit

1600

30080

3200

$60160

Total overhead cost

$951010

$1097625

Total units produced

1600

3200

Overhead cost per unit

$594.38

$343.01

(2)

Model 145

Model 212

Materials and Labor per unit

$190

$116

Overhead per unit

$594.38

$343.01

Total cost per unit

$784.38

459.01

(3)

Model 145

Model 212

Price per unit

$784.97

$459.40

Cost per unit

$784.38

459.01

Profit (loss) per unit

$0.59

$0.39

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