Exerclse 17-8 Uslng departmentel overhead retes to assess prices LO P2 Way Cool
ID: 2335866 • Letter: E
Question
Exerclse 17-8 Uslng departmentel overhead retes to assess prices LO P2 Way Cool produces two different models of alr conditioners. The company produces the mechanical systems In thelr components department. The mechanlcal systems are comblned with the housing assembly In its finlshing department. The activities, costs, and drivers assoclated with these two manufacturing processes and the production support process follow. ProcessActivity $ 458,880 382 , 227,808 $ 987,808 Number of batches Machine hourS Number of setups 770 8,858 Finishing Welding 186,88 Wlding hours 227,868 Number of inspections 4,688 836 288 Inspecting 62,888 $ 475,888 Rework orderS $14 9,888 35,808 63,800 $ 247,808 Purchase orders Number of units Number of units 483 4,898 4,898 Providing space Providing utilities Additional production Information conceming Its two product lines follows. Model 145 Model 212 Units produced Welding hours Batches Nunber of inspections Machine hourS 1,800 1,280 385 488 750 3,898 3,480 385 350 5,388 Rework orderS Purchase orderS 150 138 161 1. Determine departmental overhead rates and compute the overhead cost per unit for each product lne. Base your overhead asslgnment for the components department on machine hours. Use welding hours to assign overhead costs to the finlshing department. Assign costs to the support department based on number of purchase orders. 2 Determine the total cost per unit for each product line if the direct labor and direct materlals costs per unit are $260 for Model 145 and $190 for Model 212 3. If the market price for Model 145 Is $1025 and the market price for Model 212 Is $260, determine the profit or loss per unlt for eachExplanation / Answer
Part 1
Calculation of Departmental Overhead Rate
Components Department
Changeover
$ 458,000.00
machining
$ 302,000.00
Setups
$ 227,000.00
Total Overheads in Components Department
$ 987,000.00
Machine Hours
8050
Overhead Rate ( Overhead cost/Machine Hours)
$ 122.61
Finishing Department
Welding
$ 186,000.00
Inspecting
$ 227,000.00
Rework
$ 62,000.00
Total Overheads in Finishing Department
$ 475,000.00
Total Welding Hours
4600
Overhead Rate ( Overhead cost/Welding Hours)
$ 103.26
Support Department
Purchasing
$ 149,000.00
Providing Space
$ 35,000.00
Providing utilities
$ 63,000.00
Total Overheads in Support Department
$ 247,000.00
Total Number of Purchase Orders
483
Overhead Rate ( Overhead cost/Purchase orders)
$ 511.39
Model 145
Activity Driver
Departmental Overhead Rate
Total Overhead Cost
Components
2750
$ 122.61
$ 337,173.91
Finishing
1200
$ 103.26
$ 123,913.04
Support
322
$ 511.39
$ 164,666.67
Total Overhead Cost Assigned
$ 625,753.62
Units Produced
1800
Overhead Per Unit
$ 347.64
Model 212
Activity Driver
Departmental Overhead Rate
Total Overhead Cost
Components
5300
$ 122.61
$ 649,826.09
Finishing
3400
$ 103.26
$ 351,086.96
Support
161
$ 511.39
$ 82,333.33
Total Overhead Cost Assigned
$ 1,083,246.38
Units Produced
3090
Overhead Per Unit
$ 350.57
Statement of Total Cost Per Unit
Details
Model 145
Model 212
Direct Labor and Direct Material Per Unit
$ 260.00
$ 190.00
Overhead Cost per Unit
$ 347.64
$ 350.57
Total Cost Per Unit
$ 607.64
$ 540.57
Statement of Profit (loss) per Unit
Details
Model 145
Model 212
Market Price Per Unit
$ 1,025.00
$ 260.00
Cost Per Unit
$ 607.64
$ 540.57
Profit (loss) Per unit
$ 417.36
$ (280.57)
Calculation of Departmental Overhead Rate
Components Department
Changeover
$ 458,000.00
machining
$ 302,000.00
Setups
$ 227,000.00
Total Overheads in Components Department
$ 987,000.00
Machine Hours
8050
Overhead Rate ( Overhead cost/Machine Hours)
$ 122.61
Finishing Department
Welding
$ 186,000.00
Inspecting
$ 227,000.00
Rework
$ 62,000.00
Total Overheads in Finishing Department
$ 475,000.00
Total Welding Hours
4600
Overhead Rate ( Overhead cost/Welding Hours)
$ 103.26
Support Department
Purchasing
$ 149,000.00
Providing Space
$ 35,000.00
Providing utilities
$ 63,000.00
Total Overheads in Support Department
$ 247,000.00
Total Number of Purchase Orders
483
Overhead Rate ( Overhead cost/Purchase orders)
$ 511.39
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