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 $ 500,000 Number of batches 800 Machining 279,000 Machine hours 6,000 Setups 225,000 Number of setups 120 $1,684,000 Finishing Welding $ 180, 300 Welding hours 3,000 Inspecting 210,000 Number of inspections 700 Rework 75,000 Rework orders 300 $ 465,300 Support Purchasing $ 135,000 450 Purchase orders Providing space 32,000 Number of units 5,000 Providing utilities 65,000 Number of units 5,000 $ 232,000 Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders Model 145 1,500 800 400 400 1,800 60 160 300 Model 212 3,500 2,200 400 300 4,200 60 140 150 Required: 1. Using ABC, compute the overhead cost per unit for each product line, 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212 3. If the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model. honing your answers in the tabs below.

Answer 1

1 Model 145 Activity Driver Incurred Overhead assigned Model 212 Driver Overhead Incurred assigned Expected activity Activity rate 800 Number of Batches 6000 Machine hours 120 Setup $625.00 Per batch $46.50 Per machine hour $1,875.00 Per setup 400 1800 60 $2,50,000.00 $83,700.00 $1,12,500.00 400 $2,50,000.00 4200 $1,95,300.00 60 $1,12,500.00 Activity Expected Cost Component Changeover 500000 Machining 279000 Set up 225000 Finishing Welding 180300 Inspecting 210000 Rework 75000 Support Purchasing 135000 Providing space and utilities 97000 3000 Welding Hours 700 Inspections 300 Rework orders $60.10 Per Welding Hours $300.00 Per Inspections $250.00 Per Rework orders 800 400 160 $48,080.00 $1,20,000.00 $40,000.00 2200 $1,32,220.00 300 $90,000.00 140 $35,000.00 450 Purchase orders 5000 Units 300 1500 $300.00 Per Purchase orders $19.40 Per Units Total overhead cost Total Unit produced Overhead cost per unit $90,000.00 $29,100.00 $7,73,380.00 1500 $515.59 1501 $45,000.00 3500 $67,900.00 $9,27,920.00 3500 $265.12 2 Materials and Labour per unit Overhead cost per unit Total cost per unit Model 145 Model 212 250 180 $515.59 $265.12 765.59 445.12 3 Price per unit Cost per unit Profit(loss) per unit Model 145 Model 212 820 4801 765.59 445.12 54.41 34.88

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