Question

Cost 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 Overhead Activity Driver Quantity Components Changeover $462,000 Number of batches 830 Machining 302.000 Machine hours 7,840 Setups 228,000 Number of setups 60 $992,000 Finishing Welding $186,000 Welding hours 4,800 Inspecting 224,000 Number of inspections 875 Rework 61,500 Rework orders 250 $471,500 Support Purchasing $135,000 Purchase orders 561 Providing space 34,500 Number of units 5,030 Providing utilities 66,000 Number of units 5,030 $235,500 Additional production Information concerning its two product lines follows. Model 145 Model 212 Units produced 2,000 3,030 Welding hours 1,200 3,600 Batches 415 415 Number of 515 inspections 360 Machine hours 2,550 5,290 Setups 30 30 Rework orders 140 11e Purchase orders 374 187 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 $240 for Model 145 and $210 for Model 212. 3. If the market price for Model 145 is $1475 and the market price for Model 212 is $260, determine the profit or loss per unit for each model Complete this question by entering your answers in the tabs below. Required Required Required 2 3 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. (Round your Intermediate calculations and per unit cost answers to 2 decimal places.) Show less Components department 이 Finishing department Support department

Answer 1

1. Calculation of departmental overhead rates and overhead cost per unit for each product line:

Given data

Overhead cost of component department is assigned on the basis of "No. of Machine Hours".

Overhead cost of finishing department is assigned on the basis of "No. of Welding Hours".

Overhead cost of support department is assigned on the basis of "No. of purchase orders".

Departmental overhead rates is:

Components department = Overhead cost of Components department / Number of machine hours

= $992,000 / 7,840 machine hours = $126.53 per machine hour

Finishing department = Overhead cost of Finishing department / Number of welding hours

= $471,500 / 4,800 welding hours = $98.23 per welding hour

Support department = Overhead cost of Support department / Number of purchase orders

= $235,500 / 561 purchase orders = $419.79 per purchase order

Overhead cost per unit for each product line is:

Model 145	Activity Driver	Departmental OH Rate	Total Overhead Cost
(A)	(B)	(C)	(D) = (B) x (C)
Components	2,550 machine Hr.	$126.53	$322,651.50
Finishing	1,200 welding Hr.	$98.23	$117,876
Support	374 purchase orders	$419.79	$157,001.46
Total Overhead Cost			$597,528.96
Number of units produced			2,000
Overhead cost per unit			$298.76

Model 212	Activity Driver	Departmental OH Rate	Total Overhead Cost
(A)	(B)	(C)	(D) = (B) x (C)
Components	5,290	$126.53	$669,343.70
Finishing	3,600	$98.23	$353,628
Support	187	$419.79	$78,500.73
Total Overhead Cost			$1,101,472.43
Number of units produced			3,030
Overhead cost per unit			$363.52

2. Calculation of total cost per unit for each Model:

Item	Model 145	Model 212
Direct labor and material cost per unit	$240	$210
Overhead cost per unit	$298.76	$363.52
Total cost per unit	$538.76	$573.52

3. Calculation of profit or loss per unit for each Model:

Item	Model 145	Model 212
A. Market selling price	$1,475	$260
B. Total cost per unit	$538.76	$573.52
C. Profit (loss) per unit (A - B)	$936.24	($313.52)