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. (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 7,720 140 Finishing Welding Inspecting Rework Overhead Cost Driver $456,000 Number of batches 300,600 Machine hours 228,000 Number of setups $984,600 $182,800 Welding hours 221,000 Number of inspections 61,350 Rework orders $465,150 $134,500 Purchase orders 31,550 Number of units 60,830 Number of units $226,880 5,300 775 190 Support Purchasing Providing space Providing utilities 480 6,000 6,000 Additional production information concerning its two product lines follows. Model 145 2,000 2,000 Model 212 4,000 3,300 375 265 5,400 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 375 510 2,320 70 70 120 160 320 Required:

Answer 1

Answers

• Question #1

1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line.
Total Overhead	$1,676,630	$217.18	per machine hour
Total machine hours	7,720
2
Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Units Produced	OH Cost per unit
Model 145	2,320	$ 217.18	$         503,857.60	2,000	$      251.93
Model 212	5,400	$ 217.18	$      1,172,772.00	4,000	$      293.19
		Model 145	Model 212
Direct material and Direct Labor cost		$ 220.00	$               160.00
Overhead cost per unit		$ 251.93	$               293.19
Total Cost per unit		$ 471.93	$               453.19
3
		Model 145	Model 212
Market price		$ 759.00	$                     500.00
Total Cost per unit		$ 471.93	$                     453.19
Profit (Loss) per unit		$ 287.07	$                        46.81

• Question #2

Components:
Overhead costs	$              993,000.00	116.96	per machine hour
Machine hours	8,490
Finishing:
Overhead costs	$              473,000.00	78.83	per weilding hour
Weilding hours	6,000
Support:
Overhead costs	$              245,500.00	457.17	per purchase order
Purchase orders	537
Model 145	Activity Driver	Departmental OH rate	Total Overhead cost
Components	3150	$              116.96	$          368,424.00
Finishing	2400	$                 78.83	$          189,192.00
Support	358	$              457.17	$          163,666.86
			$          721,282.86
		Units	1600
		Overhead cost per unit	$                  450.80
Model 212	Activity Driver	Departmental OH rate	Total Overhead cost
Components	5340	$              116.96	$          624,566.40
Finishing	3600	$                 78.83	$          283,788.00
Support	179	$              457.17	$            81,833.43
			$          990,187.83
		Units	3090
		Overhead cost per unit	$                  320.45
Working		Model 145	Model 212
A	Material & Labor per unit	$              180.00	$                  170.00
B	Overhead cost per unit	$              450.80	$                  320.45
C = A + B	Total Cost per unit	$              630.80	$                  490.45
Working		Model 145	Model 212
A	Price per unit	$              800.00	$                  270.00
B	Cost per unit	$              630.80	$                  490.45
C = A - B	Profit (Loss) per unit	$              169.20	$                (220.45)