Question

Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its 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 730 8,550 40 Finishing Welding Inspecting Rework Overhead Cost $ 464,000 301,000 230,000 $ 995,000 $ 192,000 231,000 64,000 $ 487,000 $ 141,000 33,500 67,000 $ 241,500 Welding hours Number of inspections Rework orders 4,700 885 190 Support Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 477 5,090 5,090 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 2,000 1,600 365 485 3,250 20 100 318 Model 212 3,090 3,100 365 400 5,300 20 90 159 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 $230 for Model 145 and $170 for Model 212. 3. If the market price for Model 145 is $1,550 and the market price for Model 212 is $290, determine the profit or loss per unit for each model.

Answer 1

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Way Cool	Answer 1
Calculation of ABC rates for overhead			A	B	C=B/A
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Components	Changeover	Number of batches	464,000.00	730.00	635.62
	Machining	Machine hours	301,000.00	8,550.00	35.20
	Setups	Number of Setups	230,000.00	40.00	5,750.00
	Total Cost assigned		995,000.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Finishing	Welding	Welding hours	192,000.00	4,700.00	40.85
	Inspecting	Number of inspections	231,000.00	885.00	261.02
	Rework	Rework orders	64,000.00	190.00	336.84
	Total Cost assigned		487,000.00
Process	Activity cost pool	Cost Driver	Cost	Quantity	ABC rates
Support	Purchasing	Purchase orders	141,000.00	477.00	295.60
	Providing space	Number of units	33,500.00	5,090.00	6.58
	Providing utilities	Number of units	67,000.00	5,090.00	13.16
	Total Cost assigned		241,500.00

			See C	D	D=C*D	E	F=C*E
	Allocation table			Model 145	Model 212
Process	Activity cost pool	Cost Driver	ABC Rates	Activity used	Cost assigned	Activity used	Cost assigned
Components	Changeover	Number of batches	635.62	365.00	232,001.30	365.00	232,001.30
	Machining	Machine hours	35.20	3,250.00	114,400.00	5,300.00	186,560.00
	Setups	Number of Setups	5,750.00	20.00	115,000.00	20.00	115,000.00
Finishing	Welding	Welding hours	40.85	1,600.00	65,360.00	3,100.00	126,635.00
	Inspecting	Number of inspections	261.02	485.00	126,594.70	400.00	104,408.00
	Rework	Rework orders	336.84	100.00	33,684.00	90.00	30,315.60
Support	Purchasing	Purchase orders	295.60	318.00	94,000.80	159.00	47,000.40
	Providing space	Number of units	6.58	2,000.00	13,160.00	3,090.00	20,332.20
	Providing utilities	Number of units	13.16	2,000.00	26,320.00	3,090.00	40,664.40
	Total Cost assigned				820,520.80		902,916.90
	Number of units				2,000.00		3,090.00
	Overhead cost per unit				410.26		292.21

Answer 2
Total cost per unit	Add a comment Know the answer? Add Answer to: Way Cool produces two different models of air conditioners. The company produces the mechanical systems in... Your Answer: Post as a guest Your Name: What's your source? Earn Coins Coins can be redeemed for fabulous gifts. Log In Sign Up Post as anonymous Post Your Answer Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free. Similar Homework Help Questions Way Cool produces two different models of air conditioners. The company produces the mechanical systems in... 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. 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