Question

Exercise 17-8

Exercise 17-8 Using the plantwide overhead rate to assess prices LO P1 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. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.) Process Activity Components Changeover Machining Setups Quantity 098 7,722 162 Finishing Welding Inspecting Rework Dverhead Cost Driver $ 454,569 Number of batches 326,200 Machine hours 228,00 Number of setups $ 992,789 $ 109,960 Helding hours 228, and Number of inspections 61,950 Rework orders $ 479,750 $ 195,500 Purchase orders 36,82 Number of units 60,429 Number of units $ 226,720 5,102 782 202 Support 518 Purchasing Providing space Providing utilities 4,862 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 1,600 2,200 445 585 2,328 BB 100 345 Model 212 3,280 2,900 445 275 5,488 30 190 173

Answer 1

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Way Cool
Process	Activity cost pool	Cost Driver	Cost	Note
Components	Changeover	Number of batches	454,500.00
	Machining	Machine hours	300,200.00
	Setups	Number of Setups	228,000.00
	Total Cost assigned		982,700.00
Process	Activity cost pool	Cost Driver	Cost
Finishing	Welding	Welding hours	180,900.00
	Inspecting	Number of inspections	228,000.00
	Rework	Rework orders	61,850.00
	Total Cost assigned		470,750.00
Process	Activity cost pool	Cost Driver	Cost
Support	Purchasing	Purchase orders	135,500.00
	Providing space	Number of units	30,800.00
	Providing utilities	Number of units	60,410.00
	Total Cost assigned		226,710.00
	Total Overhead costs		1,680,160.00	A
Answer 1
Cost Driver	Model 145	Model 212	Total
Machine hours	2,320.00	5,400.00	7,720.00	B
Plant wide OH rate			217.64	C=A/B

Answer 2	D	See C	E=D*C	F	G=E/F
Overhead assigned	Activity Driver	Plant wide OH rate	Total overhead cost	Units produced	OH cost per unit
Model 145	2,320.00	217.64	504,918.55	1,600.00	315.57
Model 212	5,400.00	217.64	1,175,241.45	3,200.00	367.26

Total cost per unit	Model 145	Model 212	Note
Material and labor cost per unit	270.00	140.00
Overhead cost per unit	315.57	367.26	See G
Total cost per unit	585.57	507.26	H
Answer 3	Model 145	Model 212
Sell price per unit	734.00	460.00
Total cost per unit	585.57	507.26	See H
Profit (loss) per unit	148.43	(47.26)

Rafner
Particulars	Assembly	Note
Manufacturing overhead costs	1,257,300.00	I
Direct labor hours	12,600.00	J
Departmental OH rate	99.79	K=I/J