Way Cool produces two different models of air conditioners. The company produces

Question

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. Additional production information concerning its two product lines follows. Using ABC. compute the overhead cost per unit for each product line. (Round your intermediate calculations and round activity rate and cost per unit answers to 2 decimal places Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $118 for Model 212. (Round your final answers to 2 decimals places If the market price for Model 145 is $601.90 and the market price for Model 212 is $332.41. determine the profit or loss per unit for each model. (Round your final answers to 2 decimals places.)

Explanation / Answer

Computation of overhead cost per unit for each product line:

       Activity                    Actvity Rate ($)                    Model 145                          Model 212

                                                                        Activity driver   overhead ($)    Activity driver    overhead ($)

1. Changeover                         525                         415                217,875                415             217,875

2. Machining                         47.20                     3,150       148,680                 5,340           252,048

3. Set ups                             1,805                         10                  18,050                   10               18,050

4. Welding                            62.80                      1,800              113,040                3,000            188,400

5. Inspecting                           355                           485               172,175                 400             142,000

6. Rework                                205                            160                32,800                  100             20,500

7. Purchasing                          310                             365              113,150                 183             56,730

8. Providing space                   18.60                        2,900              53,940                5,800           107,880

                              Total      9,285              869,710             15,248           1003,483

                                       This implies overhead cost per unit =           $93.67                                   $65.81

                                                                                                 [869,710/ 9,285]                   [1003,483/ 15,248]

Step 2. Calculation of Total cost per unit:

                           Particulars                       Model 145                Model 212

               Materials & Labor per unit                 250                          118

                Overhead per unit                             93.67                      65.81

               Total cost per unit                         343.67                     183.81

Step 3. Determination of profit/loss per unit

                                Particulars             Model 145                Model 212

                   Price per unit                601.90                    332.41

                   less: Cost per unit              ( 343.67 )                  ( 183.81 )

                             Profit per unit                258.23                      148.60

Note: Activity rate in overhead calculation is arrived by Dividing Total Expected cost by expected Activity.

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