Exerclse 4-9 Using ABC to assess prices LO P3 Way Cool produces two different mo

Question

Exerclse 4-9 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 followw Process Activity Components Changeover Quantity 930 7,780 100 Overhead Cost Driver 571,95 Number of batches 518 Machine hours Machining 183,88 Number of setups $1,111,460 Finishing Welding 6,480 865 228 392,32 Welding hours Inspecting Rework 276,898 1,7e0 Number of inspections Rework orders $ 72e,820 Purchasing Providing space providing utilities 503 3,308 3, 300 Support $ 155,930 Purchase orders 31,88 Number of units 29 58 Number of units $217,31e Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders 2,280 3,880 465 370 3,350 50 180 163 1,100 465 495 2,35e 129 335 Required: 1. Using ABC compute the overhead cost per unit for each product line 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $180 for Model 145 and $119 for Model 212 3. If the market price for Model 145 is $1,050.16 and the market price for Model 212 is $616.25. determine the profit or loss per unit for each model.

Explanation / Answer

Model 145 model 212 Activity Expected Expected activity Activity rate Activity oh Activity oh costs driver assigned driver assigned Components Changeover 571,950 930 no batches 615 no batches 465 285975 465 285975 Machining 356,510 7,700 MH's 46.3 MH's 2,350 108805 5,350 247705 Setups 183,000 100 no setups 1830 no setups 50 91500 50 91500 Finishing Welding 392,320 6,400 welding hrs 61.3 welding hrs 2,600 159380 3,800 232940 Inspecting 276,800 865 no inspections 320 no inspections 495 158400 370 118400 Rework 51,700 220 Re orders 235 Re orders 120 28200 100 23500 Support Purchasing 155,930 503 pur orders 310 pur orders 335 103850 168 52080 providing space&yutilit 61,380 3,300 no units 18.6 no units 1,100 20460 2,200 40920 2,049,590 total oh 956570 1093020 units produced 1,100 2,200 oh cost per unit 869.61 496.83 model 145 model 212 2) Materials and labor per unit 180.00 119.00 overhead cost per unit 869.61 496.83 total cost per unit 1049.61 615.83 3) model 145 model 212 price per unit 1050.16 616.25 cost per unit 869.61 496.83 profit(loss)per unit 180.55 119.42

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