Question

Exercise 17-8 Using departmental overhead rates to assess prices LO P2 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 Components Changeover Machining Setups Driver Number of batches Machine hours Number of setups Quantity 93e 7,950 2e Finishing Welding Inspecting Rework Overhead Cost $ 460,000 313,000 229,000 $1,002,800 $ 188,000 234,000 63,500 $ 485,500 $ 147,000 36,500 70,000 $ 253,500 Welding hours Number of inspections Rework orders 4.600 885 200 Support Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 483 4,900 4,900 Additional production information concerning its two product lines follows Model 212 3,100 3,500 465 Units produced Welding hours Batches Number of Inspections Machine hours Setups Rework orders Purchase orders Model 145 1,800 800 465 485 2,650 10 140 322 400 5,300 10 60 161 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 $250 for Model 145 and $120 for Model 212 3. If the market price for Model 145 is $1175 and the market price for Model 212 is $310, determine the profit or loss per unit for each model

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Way Cool
Answer 1
Particulars	Components	Note
Total Cost	1,002,000.00	A
Machine hours	7,950.00	B
Departmental OH rate	126.04	C=A/B
Particulars	Finishing
Total Cost	485,500.00	D
Welding hours	4,600.00	E
Departmental OH rate	105.54	F=D/E
Particulars	Support
Total Cost	253,500.00	G
Purchase orders	483.00	H
Departmental OH rate	524.84	I=G/H

	J	K	L=J*K
Model 145	Activity Driver	Departmental OH rate	Total overhead cost
Components	2,650.00	126.04	334,006.00
Finishing	800.00	105.54	84,432.00
Support	322.00	524.84	168,998.48
Total OH cost			587,436.48
Units produced			1,800.00
OH cost per unit			326.35
	M	N	O=M/N
Model 212	Activity Driver	Departmental OH rate	Total overhead cost
Components	5,300.00	126.04	668,012.00
Finishing	3,800.00	105.54	401,052.00
Support	161.00	524.84	84,499.24
Total OH cost			1,153,563.24
Units produced			3,100.00
OH cost per unit			372.12
Answer 2	Model 145	Model 212
Material and labor cost per unit	250.00	120.00
Overhead cost per unit	326.35	372.12
Total cost per unit	576.35	492.12
Answer 3	Model 145	Model 212
Sell price per unit	1,175.00	310.00
Total cost per unit	576.35	492.12
Profit (loss) per unit	598.65	(182.12)