Exercise 17-8 Using departmental overhead rates to assess prices LO P2 Way Cool

Question

Exercise 17-8 Using departmental overhead rates to assess prices LO P2 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. Quantity 810 8, 380 120 overhead Cost Driver Process Activit Components Changeover $ 470,000 Number of batches 305, 000 Machine hours Machining Setups 230,000 $1,005,000 Number of setups S 184,000 Welding hours 6, 200 885 190 Finishing Welding Inspecting Rework 233,000 65,000 482,000 umber of inspections Rework orders 519 4, 610 4, 610 Support Purchasing $ 135, 000 33, 500 65,000 $ 233, 500 Purchase orders Number of units Number of units Providing space Providing utilities Additional production information concerning its two product lines follows Model 145 Mode1 212 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 1, 600 2,200 405 495 3,050 60 150 346 3,010 , 405 390 s, 330 60 40 173

Explanation / Answer

Components department component department overhead cost 1,005,000 119.93 per machine hour total machine hours 8,380 Finishing department finishing department overhead cost 482,000 77.74 per welding hour total welding hours 6,200 Support department support department overhead cost 233,500 449.90 per purchase order total purchase orders 519 Model 145 Driver OH rate total oh cost Components 3,050 119.93 365781.6 Finishing 2,200 77.74 171032.3 Support 346 449.90 155666.7 692,481 1,600 432.80 Model 145 Driver OH rate total oh cost Components 5,330 119.93 639218.4 Finishing 4,000 77.74 310967.7 Support 173 449.90 77833.33 1,028,019 3,010 341.53 model 145 model 212 2) Materials and labor per unit 240.00 200.00 overhead cost per unit 432.80 341.53 total cost per unit 672.80 541.53 3) model 145 model 212 price per unit 2075 300.00 cost per unit 672.80 541.53 profit(loss)per unit 1402.20 -241.53

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