#15 Way Cool produces two different models of air conditioners. The company prod
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Question
#15
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 Process Activity Components Changeover Overhead Cost Driver Quantity $454,000 311,000 230,000 $995,000 184,000 233,000 63,500 480,500 149,000 34,500 69,000 $252,500 Machining Setups Number of batches Machine hours Number of setups 730 7,710 40 Finishing Welding Inspecting Rework Welding hours Number of inspections Rework orders 4,200 835 240 Purchasing Providing space Providing utilities Purchase orders Number of units Number of units Support 477 5,110 5,110 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 2,000 1,000 365 455 2,450 20 160 318 3,110 3,200 365 380 5,260 20 80 159 Required: 1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase ordersExplanation / Answer
Part 1)
Calculation of Departmental Overhead Rate
Components Department
Changeover
$ 454,000.00
machining
$ 311,000.00
Setups
$ 230,000.00
Total Overheads in Components Department
$ 995,000.00
Machine Hours
7710
Overhead Rate ( Overhead cost/Machine Hours)
$ 129.05
Finishing Department
Welding
$ 184,000.00
Inspecting
$ 233,000.00
Rework
$ 63,500.00
Total Overheads in Finishing Department
$ 480,500.00
Total Welding Hours
4200
Overhead Rate ( Overhead cost/Welding Hours)
$ 114.40
Support Department
Purchasing
$ 149,000.00
Providing Space
$ 34,500.00
Providing utilities
$ 69,000.00
Total Overheads in Support Department
$ 252,500.00
Total Number of Purchase Orders
477
Overhead Rate ( Overhead cost/Purchase orders)
$ 529.35
Model 145
Activity Driver
Departmental Overhead Rate
Total Overhead Cost
Components
2450
$ 129.05
$ 316,180.29
Finishing
1000
$ 114.40
$ 114,404.76
Support
318
$ 529.35
$ 168,333.33
Total Overhead Cost Assigned
$ 598,918.38
Units Produced
2000
Overhead Per Unit
$ 299.46
Model 212
Activity Driver
Departmental Overhead Rate
Total Overhead Cost
Components
5260
$ 129.05
$ 678,819.71
Finishing
3200
$ 114.40
$ 366,095.24
Support
159
$ 529.35
$ 84,166.67
Total Overhead Cost Assigned
$ 1,129,081.62
Units Produced
3110
Overhead Per Unit
$ 363.05
Part 2)
Statement of Total Cost Per Unit
Details
Model 145
Model 212
Direct Labor and Direct Material Per Unit
$ 200.00
$ 180.00
Overhead Cost per Unit
$ 299.46
$ 363.05
Total Cost Per Unit
$ 499.46
$ 543.05
Part 3)
Statement of Profit (loss) per Unit
Details
Model 145
Model 212
Market Price Per Unit
$ 1,175.00
$ 290.00
Cost Per Unit
$ 499.46
$ 543.05
Profit (loss) Per unit
$ 675.54
$ (253.05)
Calculation of Departmental Overhead Rate
Components Department
Changeover
$ 454,000.00
machining
$ 311,000.00
Setups
$ 230,000.00
Total Overheads in Components Department
$ 995,000.00
Machine Hours
7710
Overhead Rate ( Overhead cost/Machine Hours)
$ 129.05
Finishing Department
Welding
$ 184,000.00
Inspecting
$ 233,000.00
Rework
$ 63,500.00
Total Overheads in Finishing Department
$ 480,500.00
Total Welding Hours
4200
Overhead Rate ( Overhead cost/Welding Hours)
$ 114.40
Support Department
Purchasing
$ 149,000.00
Providing Space
$ 34,500.00
Providing utilities
$ 69,000.00
Total Overheads in Support Department
$ 252,500.00
Total Number of Purchase Orders
477
Overhead Rate ( Overhead cost/Purchase orders)
$ 529.35
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