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 Components Activity Changeover Machining Setups Driver Number of batches Machine hours Number of setups Quantity 710 7,830 160 Finishing Welding Inspecting Rework Overhead Cost $ 457,950 362,529 297,600 $1,118,079 $ 332,080 247,275 32,800 $ 612,155 $ 204,610 30,500 131,320 $ 366,430 Welding hours Number of inspections Rework orders 5,600 785 160 Support Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 518 8,700 8,700 Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders Model 145 2,900 1,600 355 465 2,550 80 70 345 Model 212 5,800 4,000 355 320 5,280 80 90 173 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 $200 for Model 145 and $118 for Model 212. 3. If the market price for Model 145 is $525.43 and the market price for Model 212 is $317.60, determine the profit or loss per unit for each model. Complete this question by entering your answers in the tabs below.

Answer 1

									Model 145		Model 212
1)				Expected					Activity Driver	Overhead	Activity Driver	Overhead
	Activity			Costs	Expected Activity		Activity Rate		Incurred	Assigned	Incurred	Assigned
	Components
	Changeover			$ 457,950.00	710	No. of batches	$    645.00		355	$ 228,975.00	355	$    228,975.00
	Machining			$ 362,529.00	7830	Machine Hours	$      46.30		2550	$ 118,065.00	5280	$    244,464.00
	Setups			$ 297,600.00	160	Setups	$ 1,860.00		80	$ 148,800.00	80	$    148,800.00
	Finishing
	Welding			$ 332,080.00	5600	Welding Hours	$      59.30		1600	$   94,880.00	4000	$    237,200.00
	Inspecting			$ 247,275.00	785	Inspections	$    315.00		465	$ 146,475.00	320	$    100,800.00
	Rework			$   32,800.00	160	Rework orders	$    205.00		70	$   14,350.00	90	$      18,450.00
	Support
	Purchasing			$ 204,610.00	518	Purchase orders	$    395.00		345	$ 136,275.00	173	$      68,335.00
	Providing space utilities			$ 161,820.00	8700	Units	$      18.60		2900	$   53,940.00	5800	$    107,880.00
								Total OH cost		$ 941,760.00		$ 1,154,904.00
								No. of units		2900		5800
								OH cost per unit		$        324.74		$            199.12

				Models
2)	Particulars			145	212
	Direct Materials and Direct Labor			$ 200.00	$ 118.00
	OH assigned			$ 324.74	$ 199.12
	Total cost per unit			$ 524.74	$ 317.12

				Models
3)	Particulars			145	212
	Market price			$ 525.43	$ 317.60
	Total cost per unit			$ 524.74	$ 317.12
	Profit per unit			$      0.69	$      0.48