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. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.)

   
Additional production information concerning its two product lines follows.

Process Activity Overhead Cost Driver Quantity Components Changeover $ 458,000 Number of batches 770 Machining 300,600 Machine hours 7,730 Setups 225,500 Number of setups 200 $ 984,100 Finishing Welding $ 182,600 Welding hours 4,800 Inspecting 221,000 Number of inspections 750 Rework 60,950 Rework orders 170 $ 464,550 Support Purchasing $ 137,500 Purchase orders 563 Providing space 32,250 Number of units 6,300 Providing utilities 60,740 Number of units 6,300 $ 230,490 1. Using a plantwide overhead rate based on machine hours, 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 $120 for Model 212 Activity Driver Plantwide OH rate Units Produced OH Cost per unit Overhead Assigned Model 145 Model 212 Total Overhead Cost 0 0 Model 145 Model 212 3. If the market price for Model 145 is $733 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. Model 145 Model 212 Market price

Explanation / Answer

Req 1: Plantwide Overhead rate based on machine hours Plantwide overhead rate = Total Overheads / Machine hours = Overhead rate per MH Plantwide Overhead rate = 230,490 / 7730 = 29.82 per MH Req 2: Total cost per unit Overhead Assigned Activity Driver Overhead rate Total Overheads Units Produced OH cost per unit Model 145 2330 29.82 69480 2100 33.08 Model 212 5400 29.82 161020 4200 38.34 Model 145 Model 212 Direct material and labour cost per unit 250 120 Add: Overheads cost per unit 33.08 38.34 Total cost per unit 283.08 158.34 Req 3:Profit/Loss per unit Model 145 Model 212 market price 733 470 Less: Cost per unit 283.08 158.34 Profit/(Loss) 449.92 311.66

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