Chapter 4 Excercise Question 5 Way Cool produces two different models of air con

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Chapter 4 Excercise Question 5

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 Overhead Cost Driver S 548,250 Number of batches 372,098 373,000 Machine hours Number of setups 850 8,160 200 Setups $1,293,346 Finishing Welding Inspecting Rework 4,500 840 160 S 258,050 Welding hours Number of 281.400 47,200 Rework orders S 584,650 Support Purchasing S Providing space Providing utilities 168,505 31,700 89,260 Purchase orders Number of units Number of units 503 8,300 8,300 S 289,485 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced Welding hours Batches Number of 2,100 1,400 425 490 4,200 3,100 425 350 inspections Machine hour Setups Rework orders Purchase orders 2,850 100 80 335 5,310 100 80 188

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Allocation of overhead and computation of overhead cost per unit - ABC Activity Expected cost Activity Base Expected Activity Activity Rate Model 145 Model 212 Activity Driver incurred Overhead assigned Activity Driver incurred Overhead assigned Component: Changeover $548,250.00 Nos of batches 850 $645.00 425 $274,125.00 425 $274,125.00 Machining $372,096.00 Machine hours 8160 $45.60 2850 $129,960.00 5310 $242,136.00 Setup 373000.00 Nos of setups 200 $1,865.00 100 $186,500.00 100 $186,500.00 Finishing: Welding 256050.00 Welding hours 4500 $56.90 1400 $79,660.00 3100 $176,390.00 Inspecting 281400.00 Nos of inspections 840 $335.00 490 $164,150.00 350 $117,250.00 Rework 47200.00 Rework orders 160 $295.00 80 $23,600.00 80 $23,600.00 Support: Purchasing 168505.00 Purchase orders 503 $335.00 335 $112,225.00 168 $56,280.00 Providing space and utilities 120960.00 Nos of units 6300 $19.20 2100 $40,320.00 4200 $80,640.00 Total $2,167,461.00 $1,010,540.00 $1,156,921.00 Nos of units 2100 4200 Overhead cost per unit $481.21 $275.46

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