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.

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 $250 for Model 145 and $180 for Model 212.
3. If the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model.

Process Activity Overhead Cost Driver Quantity Components Changeover $ 500,000 Number of batches 800 Machining 279,000 Machine hours 6,000 Setups 225,000 Number of setups 120 $ 1,004,000 Finishing Welding $ 180,300 Welding hours 3,000 Inspecting 210,000 Number of inspections 700 Rework 75,000 Rework orders 300 $ 465,300 Support Purchasing $ 135,000 Purchase orders 450 Providing space 32,000 Number of units 5,000 Providing utilities 65,000 Number of units 5,000 $ 232,000 Complete this question by entering your answers in the tabs below Required 1Required 2Required 3 Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimal places.) Model 145 Model 212 Activity Expected Costs Expected Activity Activity Rate Activity driver Overhead Activity driver Overhead assigned incurred assigned incurred Components Changeover Machining Setups 500,000 279,000 225,000 800 Number of batches 6,000 Machine hours 120 Setups Finishing Welding Inspecting Rework 180,300 210,000 75,000 3,000 Welding hours 700 Inspections 300 Rework orders Support Purchasing Providing space and utilities 135,000 450 Purchase orders 97,000 5,000 Units Total overhead cost Total units produced Overhead cost per unit

Explanation / Answer

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity MODEL145 MODEL 212 ACTIVITY COST POOL Measures Overheads Activity Rate Activity driver OH assigned Activity driver OH assigned Components: Changeover Bacthes 500,000 800 625 per batch 400 250000 400 250000 Machining MH 279,000 6,000 47 per MH 1800 83700 4200 195300 Setupps Setups 225,000 120 1,875 per Setup 60 112500 60 112500 finishing Welding Welding hrs 180,300 3,000 60 per Welding Hr 800 48080 2200 132220 Inspecting Inspections 210,000 700 300 Per inspection 400 120000 300 90000 Rework Rework orders 75,000 300 250 Per rework order 160 40000 140 35000 Support Purchasing Purchase orders 135,000 450 300 Per order 300 90000 150 45000 Providing space Units 32,000 5,000 6 Per unit 1500 9600 3500 22400 Providing utilities Units 65,000 5,000 13 per unit 1500 19500 3500 45500 Total overheads assigned 773380 927920 Number of units 1500 3500 OH cost per unit 515.59 265.12 TOTAL COST PER UNIT MODEL 145 MODEL 212 Direct material & Labour 250 180 OH cost 515.59 265.12 Unit product cost 765.59 445.12 PROFIT PER UNIT MODEL 145 MODEL 212 Market price 820 480 Unit cost 765.59 445.12 Profit/(loss) per unit 54.41 34.88

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