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 Quantity 850 8,560 60 Finishing Welding Inspecting Rework Overhead Cost Driver $ 478,000 Number of batches 308,000 Machine hours 234,000 Number of setups $1,020,000 $ 188,000 Welding hours 234,000 Number of inspections 64,000 Rework orders $ 486,000 $ 141,000 Purchase orders 34,000 Number of units 67,000 Number of units $ 242,000 4,900 865 200 Support Purchasing Providing space Providing utilities 537 4,999 4,999 Additional production information concerning its two product lines follows. Model 212 3,090 3,900 425 Model 145 1,900 1,000 425 465 3,250 30 100 358 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 400 5,310 30 100 179

Answer 1

Answer

[1]

Components:
Overhead costs	$ 1,020,000.00	119.16	per machine hour
Machine hours	8,560
Finishing:
Overhead costs	$      486,000.00	99.18	per weilding hour
Weilding hours	4,900
Support:
Overhead costs	$      242,000.00	450.65	per purchase order
Purchase orders	537
Model 145	Activity Driver	Departmental OH rate	Total Overhead cost
Components	3250	$          119.16	$      387,270.00
Finishing	1000	$            99.18	$        99,180.00
Support	358	$          450.65	$      161,332.70
			$      647,782.70
		Units	1900
		Overhead cost per unit	$              340.94
Model 212	Activity Driver	Departmental OH rate	Total Overhead cost
Components	5310	$          119.16	$      632,739.60
Finishing	3900	$            99.18	$     386,802.00
Support	179	$          450.65	$        80,666.35
			$ 1,100,207.95
		Units	3090
		Overhead cost per unit	$              356.05

[2]

Working		Model 145	Model 212
A	Material & Labor per unit	$          300.00	$                    180.00
B	Overhead cost per unit	$          340.94	$                    356.05
C = A + B	Total Cost per unit	$          640.94	$                    536.05

[3]

Working		Model 145	Model 212
A	Price per unit	$      2,075.00	$                    260.00
B	Cost per unit	$          640.94	$                    536.05
C = A - B	Profit (Loss) per unit	$      1,434.06	$                 (276.05)