Question

Question 2

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. (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 Driver Number of batches Machine hours Number of setups Quantity 770 7,600 100 Finishing Welding Inspecting Rework Overhead Cost $ 458,000 300, 400 229,500 $ 987,900 $ 181,900 235,000 60,250 $ 477,150 $ 135,500 31,450 60,310 $ 227,260 Welding hours Number of inspections Rework orders 4,800 760 180 Support 480 Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 5,100 5,100

Answer 1

1.

Overhead cost per unit for each product line. Total Overhead $1,692,310 $222.67 per machine hour Total machine hours 7,600

Total overhead cost = Overhead cost of Components process + Overhead cost of Finishing process + Overhead cost of Support process
= $987,900 + $477,150 + $227,260 = $1,692,310

Total machine hours = 7,600

Overhead cost per unit using plantwide overhead rate based on machine hours = Total overhead cost / Total machine hours
= $1,692,310 / 7,600
= $222.67236842105
= $222.67 (rounded off)

2.

Overhead Assigned Activity Driver Model 145 2,300 Model 212 5,300 Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit $222.67 $512,141.00 1,700 $301.26 $222.67 $1,180,151.00 3,400 $347.10 Direct material and Direct Labor cost Overhead cost per unit Total Cost per unit Model 145 $280.00 $301.26 $581.26 Model 212 $180.00 $347.10 $527.10

Activity driver = Machine hours

Total overhead cost = Plantwide overhead rate × Activity driver

Overhead cost per unit = Total overhead cost/ Units produced

3.

Market price Total Cost per unit Profit (Loss) per unit Model 145 $736.00 $581.26 $154.74 Model 212 $480.00 $527.10 -$47.10

Profit (Loss) per unit = Market price per unit - Total Cost per unit