Question

Exercise 17-9 Using ABC to assess prices LO P3 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 Componente Changeover Machining Setups Driver Number of batches Machine hours Number of setups Quantity 870 7,830 Finishing 5,800 Welding Inspeeting Rework Overhead Coat $ 604,650 358,614 299,200 $1,262,464 $ 29, 120 344,100 36,800 $ 679,020 $ 153,000 31,600 31,430 $ 216,030 Welding hours Number of inspections Rework orders 930 160 Support 510 Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 3.300 3,300

Answer 1

Answer 1. Activity Expected Costs Expected Activity Activity Rate Model 145 Activity Overhead driver assigned incurred Model 212 Activity Overhead driver assigned incurred 1 604650 358614 299 200 870 number of batches 7830 machine hours 160 setups 695.00 per batch 45.80 per machine hour 1870.00 per setup 435 2550 80 3023 25 116790 149600 435 5280 302325 241824 149600 80 Components Changeover Machining Setups Finishing Welding Inspecting Rework Support Purchasing Providing space and utilities 298120 344100 36800 5800 welding hours 930 inspections 160 rework ordeers 51.40 per welding hour 370.00 per inspection 230.00 per rework order 2200 520 100 113080 192400 23000 3600 410 60 185040 151700 13800 153000 63030 510 purchase orders 3 300 units 340 1100 170 2200 300.00 per purchase order 19.10 per unit Total overhead costs Total units produced Overhead cost per unit 102000 21010 1020205 1100 927.46 51000 420201 1137309 22001 516.96 Answer 2. Materials and labor per unit Overhead cost per unit Total cost per unit Model 145 Model 212 230.00 119.00 927.46 516.96 1157.46 635.96 Answer 3. Price per unit Cost per unit Profit (loss) per unit Model 145 Model 212 1158.14 636.36 1157.46635.96 0.68 0.40