Exercise 17-9 Using ABC to assess prices LO P3 Way Cool produces two different m
ID: 2330364 • Letter: E
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. Activit rhead Cont Driver Quantity rocess Components changeover Machining Setups s 500,000 Number of batches 279,000 Machine houra 800 6,000 120 225,000 Number of setups $1,004,000 $ 180,300 lding hours 3,000 700 300 Pinishing Welding 210,000 Number of inspections Inspecting Revork 75,000 Revork ordere 465,300 450 5,000 5,000 Support Purchasing S 135,000 Purchase orders 32,000 Number of units Number of unite Providing space Providing utilities65 000 232,000 Additional production Information concerning its two product lines followsExplanation / Answer
Answers
Model 145
Model 212
ACTIVITY
Expected Costs
Expected Activity
Activity rates
Activity Driver incurred
Overhead assigned
Activity Driver incurred
Overhead assigned
[A]
[B]
[C = A / B]
[D]
[E = C x D]
[F]
[G = C x F]
Components:
Changeover
$ 500,000.00
800
$ 625.00
400
$ 250,000.00
400
$ 250,000.00
Machining
$ 279,000.00
6,000
$ 46.50
1,800
$ 83,700.00
4,200
$ 195,300.00
Setups
$ 225,000.00
120
$ 1,875.00
60
$ 112,500.00
60
$ 112,500.00
Finishing:
Welding
$ 180,300.00
3,000
$ 60.10
800
$ 48,080.00
2,200
$ 132,220.00
Inspecting
$ 210,000.00
700
$ 300.00
400
$ 120,000.00
300
$ 90,000.00
Rework
$ 75,000.00
300
$ 250.00
160
$ 40,000.00
140
$ 35,000.00
Support:
Purchasing
$ 135,000.00
450
$ 300.00
300
$ 90,000.00
150
$ 45,000.00
Providing Space & Utilities
$ 97,000.00
5,000
$ 19.40
1,500
$ 29,100.00
3,500
$ 67,900.00
Total Overhead cost
$ 773,380.00
Total Overhead cost
$ 927,920.00
Total Units produced
1,500
Total Units produced
3,500
Overhead cost per unit
$ 515.59
Overhead cost per unit
$ 265.12
Working
Model 145
Model 212
A
Material & Labor per unit
$ 250.00
$ 180.00
B
Overhead cost per unit
$ 515.59
$ 265.12
C = A + B
Total Cost per unit
$ 765.59
$ 445.12
Working
Model 145
Model 212
A
Price per unit
$ 820.00
$ 480.00
B
Cost per unit
$ 765.59
$ 445.12
C = A - B
Profit (Loss) per unit
$ 54.41
$ 34.88
Model 145
Model 212
ACTIVITY
Expected Costs
Expected Activity
Activity rates
Activity Driver incurred
Overhead assigned
Activity Driver incurred
Overhead assigned
[A]
[B]
[C = A / B]
[D]
[E = C x D]
[F]
[G = C x F]
Components:
Changeover
$ 500,000.00
800
$ 625.00
400
$ 250,000.00
400
$ 250,000.00
Machining
$ 279,000.00
6,000
$ 46.50
1,800
$ 83,700.00
4,200
$ 195,300.00
Setups
$ 225,000.00
120
$ 1,875.00
60
$ 112,500.00
60
$ 112,500.00
Finishing:
Welding
$ 180,300.00
3,000
$ 60.10
800
$ 48,080.00
2,200
$ 132,220.00
Inspecting
$ 210,000.00
700
$ 300.00
400
$ 120,000.00
300
$ 90,000.00
Rework
$ 75,000.00
300
$ 250.00
160
$ 40,000.00
140
$ 35,000.00
Support:
Purchasing
$ 135,000.00
450
$ 300.00
300
$ 90,000.00
150
$ 45,000.00
Providing Space & Utilities
$ 97,000.00
5,000
$ 19.40
1,500
$ 29,100.00
3,500
$ 67,900.00
Total Overhead cost
$ 773,380.00
Total Overhead cost
$ 927,920.00
Total Units produced
1,500
Total Units produced
3,500
Overhead cost per unit
$ 515.59
Overhead cost per unit
$ 265.12
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