Question

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 Cost				Driver	Quantity
Components	Changeover		$	448,950		Number of batches	730
	Machining			399,784		Machine hours	8,470
	Setups			288,800		Number of setups	160
			$	1,137,534
Finishing	Welding		$	233,220		Welding hours	4,600
	Inspecting			255,150		Number of inspections	810
	Rework			31,200		Rework orders	120
			$	519,570
Support	Purchasing		$	176,120		Purchase orders	518
	Providing space			31,200		Number of units	8,400
	Providing utilities			130,080		Number of units	8,400
			$	337,400

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		2,800			5,600
Welding hours		1,200			3,400
Batches		365			365
Number of inspections		460			350
Machine hours		3,150			5,320
Setups		80			80
Rework orders		70			50
Purchase orders		345			173

  
Required:
1. Using ABC, compute the overhead cost per unit for each product line.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $220 for Model 145 and $114 for Model 212.
3. If the market price for Model 145 is $546.42 and the market price for Model 212 is $307.69, determine the profit or loss per unit for each model.

Complete this question by entering your answers in the tabs below.

• Required 1
• Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimals places.)
• Required 2
• Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $220 for Model 145 and $114 for Model 212. (Round your final answers to 2 decimal places.)
• Required 3
• If the market price for Model 145 is $546.42 and the market price for Model 212 is $307.69, determine the profit or loss per unit for each model. (Round your final answers to 2 decimal places.)

Answer 1

Model 212 Activity Driver Dept.OHR Total OH Cost Components Machine hours$134.30 $714,476 [5,320 hours x $134.30] $112.95 Support Purchase orders$651.35 $112,684 [173 orders x $651.35] Finishing Welding hours $384,030 [3,400 hours x $112.95] $1,211,190 Model 145 Model 212 Unit Direct material & labor cost $220.00 $114.00 Given] Overhead cost per unit Total cost per unit $279.75 $499.75 S216.28 IS783,301 2,800 units: $1,211,190/5,600 units] $330.28 Model 145 Model 212 Market price per unit Total cost per unit Profit or (loss) per unit $546.42 $307.69 $499.75 $330.28 [Ref: Requirement-2] 46.67($22.59) [Market price per unit- Total cost per unit]