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.) Process Activity Components Changeover Overhead Cost Driver Quantity 810 7,740 160 456,000 300,400 227,500 $ 983,900 180,600 223,000 60,250 $ 463,850 $ 137,000 30,200 60,490 $ 227,690 Machining Setups Number of batches Machine hours Number of setup:s Finishing Welding Inspecting Rework elding hours Number of inspections Rework orders 5,900 815 240 Purchasing Providing space Providing utilities 570 5,400 5,400 Support Purchase orders Number of units Number of units 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 1,800 2,400 405 495 2,340 80 140 380 3,600 3,500 405 320 5,400 80 100 190

Explanation / Answer

Answer: Requirement 1 The plantwide overhead rate based on machine hours is calculated as follows: Machine hours =Total overhead cost/Machine hours =($983900+463850+227690)/7740 $                         216.47 Requirement 2 Total cost per unit would be calculated as follows Overhead assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Model 145 2340 $                                    216.47 $           5,06,528.37 1800 $          281.40 (2340*216.47) ($506528.37/1800) Model 212 5400 $                                    216.47 $        11,68,911.63 3600 $          324.70 (5400*216.47) ($1168911.63/3600 $        16,75,440.00 Model 145 Model 212 Direct material and direct labor $                         190.00 $                   210.00 Overhead cost $                         281.40 $                   324.70 Total cost per unit $                         471.40 (190+281.40) $                   534.70 (210+324.70) Requirement 3 The profit or loss for each model would be calculated as follows: Model 145 Model 212 Market Price 748 510 Total cost $                         471.40 $                   534.70 Profit/(Loss) $                         276.60 (748-471.40) $                    -24.70 (510-534.70)

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