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 Overhead Coss Driver Quantity Components Changeover $ 458,000 Number of batches Machining 910,000 Machine hou Setups 226,000 aber se setups $994,500 Tinishing Welding $102,000 Welding hours 3,600 Inspecting 229,000 Number of inspections Rework 64,900 Feuerk ouders 270 $ 475,000 Support Purchasing 6143,000 Purchase ordera 537 Providing space 30, 500 aniber etwa Droviding utilities 63,000 Number of unica 4.600 $236,500 Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of inapeeciona Machine hours Setups Rexork orders Purchase orders Hodei 145 Model 212 1,500 3,100 2,200 3,400 SE5 470 950 2, 450 5, 280 230 120 179 Required: 1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Bose 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 $190 for Model 145 and $200 for Model 212. 3. If the market price for Model 145 is $1,925 and the market price for Model 212 is $320, determine the profit or loss per unit for each model. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Datermine departmental overhead rates and compute the averhead 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. (Round your intermediate calculations and per unit cost answers to 2 decimal places.) Show less Components department Finishing department Support department Activity Driver Departmental OH Rate Total Overhead Cost Model 145 Components Finishing Support Modal 212 Activity Driver Departmental OH Rate Total Overhead Cost Components Finishing Support < Required Required 2 >

Answer 1

1) Components department Overhead costs # of Machine hours $994,000 $128.59 per machine hour 7,730 ($994000 / 7730 Machine hours] Finishing department Overhead costs # of Welding hours $475,000 $84.82 per welding hour 5,600 [$475000 / 5600 Welding hours] Support department Overhead costs # of Purchase orders $236,500 $440.41 per purchase order 537 [$236500 / 537 Purchase orders] Model 145 Activity Driver Dept. OHR Components Machine hours $128.59 Finishing Welding hours $84.82 Support Purchase orders $440.41 Total overhead costs allocated to Model 145 Number of units produced Overhead cost per unit of Model 145 Total OH Cost $315,045.50 [2450 hours x $128.59] $186,604.00 [2200 hours x $84.82] $157,666.78 [358 orders x $440.41] $659,316.28 1,500 $439.54 ($659316.28 / 1500 units]

Model 212 Activity Driver Dept. OHR Total OH Cost Components Machine hours $128.59 $678,955.20 [5280 hours x $128.59] Finishing Welding hours $84.82 $288,388.00 [3400 hours x $84.82] Support Purchase orders $440.41 $78,833.39 [179 orders x $440.41] Total overhead costs allocated to Model 212 $1,046,176.59 Number of units produced 3,100 Overhead cost per unit of Model 212 $337.48 ($1046176.59 / 3100 units] 2) Unit Direct material & labor cost Overhead cost per unit Total cost per unit Model 145 $190.00 $439.54 $629.54 Model 212 $200.00 [Given] $337.48 [Ref: Part-1] ($659316.28 / 1500 units; $1046176.59 / 3100 units] $537.48 3) Market price per unit Total cost per unit Profit or (loss) per unit Model 145 $1,925.00 $629.54 $1,295.46 Model 212 $320.00 --> (a) $537.48 --> (b) [Ref: Part-2] ($217.48) --> (a) - (b)