Question

Real 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. Quantity 770 Process Activity Components Changeover Machining Setups B. 16e 150 Finishing 5,900 Welding Inspecting Rework Overhead Cost Driver $ 465,850 Number of batches 381,888 Machine hours 303, 200 Number of setups $1,150, 938 $ 336, 890 Welding hours 286,000 Number of inspections 57.600 Rework orders 680, 490 $ 175, 725 Purchase orders 30, 500 Number of units 94,240 Number of units $ 300.465 889 240 Support 495 Purchasing Providing space Providing utilities 6,600 5.500 Additional production information concerning its two product lines follows. Model 212 4,400 3.900 Units produced Welding hours Batches Number of inspections Machine hours Model 145 2, 200 2,000 385 520 2,850 385 360 5, 310

Answer 1

Ans. 1	*Calculations for Activity Rate:
	Activity	Overhead cost	Activity drivers	Activiy rate
		( A)	(B)	©
	Components:
	Changeover	$465,850	770	$605	per batch
	Machining	$381,888	8,160	$47	per machine hour
	Setups	$303,200	160	$1,895	per setup
	Finishing:
	Welding	$336,890	5,900	$57	per welding hour
	Inspecting	$286,000	880	$325	per inspection
	Rework	$57,600	240	$240	per rework order
	Support:
	Purchasing	$175,725	495	$355	per purchase order
	Providing space and utilities	$124,740	6,600	$19	per unit
	*Calculations for Total overhead Cost Assigned:
				Model 145
	Activity	Activiy rate		Activity driver incurred	Overhead assigned
		©		(D)	(E = C*D)
	Components:
	Changeover	$605	per batch	385	$232,925
	Machining	$47	per machine hour	2850	$133,380
	Setups	$1,895	per setup	80	$151,600
	Finishing:
	Welding	$57	per welding hour	2000	$114,200
	Inspecting	$325	per inspection	520	$169,000
	Rework	$240	per rework order	110	$26,400
	Support:
	Purchasing	$355	per purchase order	330	$117,150
	Providing space and utilities	$19	per unit	2200	$41,580
	Total   Overhead Cost				$986,235
				Model 212
	Activity	Activiy rate		Activity driver incurred	Overhead assigned
		©		(D)	(E = C*D)
	Components:
	Changeover	$605	per batch	385	$232,925
	Machining	$47	per machine hour	5310	$248,508
	Setups	$1,895	per setup	80	$151,600
	Finishing:
	Welding	$57	per welding hour	3900	$222,690
	Inspecting	$325	per inspection	360	$117,000
	Rework	$240	per rework order	130	$31,200
	Support:
	Purchasing	$355	per purchase order	165	$58,575
	Providing space and utilities	$19	per unit	4400	$83,160
	Total   Overhead Cost				$1,145,658
Ans. 1		Model 145	Model 212
	Total overhead cost	$986,235	$1,145,658
	(/)Number of units	2,200	4,400
	Overhead cost per unit	$448.29	$260.38
	*Providing space and Providing utilities have the same activities so these are calcuted combined.
Ans. 2		Model 145	Model 212
	Materials & labor cost per unit	$210.00	$116.00
	Overhead cost per unit	$448.29	$260.38
	Total cost per unit	$658.29	$376.38
	*Total cost per unit includes materials, labor and overhead cost per unit.
Ans. 3		Model 145	Model 212
	Market price per unit	$895.00	$510.00
	(-) Total cost per unit	$658.29	$376.38
	Profit per unit	$236.71	$133.62
	*Profit per unit is the difference between selling or market price per unit and total cost per unit.