Way Cool produces two different models of air conditioners. The company produces
ID: 2342946 • Letter: W
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. 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 orders.
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 $160 for Model 212.
3. If the market price for Model 145 is $1,925 and the market price for Model 212 is $310, determine the profit or loss per unit for each model.
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 orders. (Round your intermediate calculations and per unit cost answers to 2 decimal places.)
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 $160 for Model 212. (Round your intermediate calculations and cost per unit answers to 2 decimal places.)
If the market price for Model 145 is $1,925 and the market price for Model 212 is $310, determine the profit or loss per unit for each model. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.)
Process Activity Overhead Cost Driver Quantity Components Changeover $ 476,000 Number of batches 890 Machining 306,000 Machine hours 7,730 Setups 231,000 Number of setups 20 $ 1,013,000 Finishing Welding $ 186,000 Welding hours 4,600 Inspecting 226,000 Number of inspections 835 Rework 62,500 Rework orders 180 $ 474,500 Support Purchasing $ 143,000 Purchase orders 531 Providing space 35,500 Number of units 5,170 Providing utilities 63,000 Number of units 5,170 $ 241,500Explanation / Answer
Department
Components
Finishing
Support
Allocated based on
Machine hours
Welding hours
Purchase orders
Departmental overhead cost
1013000
474500
241500
Applicable factor in numbers
7730
4600
531
Departmental overhead rate (departmental overhead cost / applicable factor in numbers)
131.05
103.15
454.80
Model 145
Activity driver
Departmental overhead rate
Total overhead cost
Components
2450
131.05
321072.50
Finishing
1600
103.15
165040.00
Support
354
454.80
160999.20
Total overhead allocated
647111.70
Number of units
2100
Overhead cost per unit. (Total overhead allocated / Number of units)
308.15
Model 212
Activity driver
Departmental overhead rate
Total overhead cost
Components
5280
131.05
691944.00
Finishing
3000
103.15
309450.00
Support
177
454.80
80499.60
Total overhead allocated
1081893.60
Number of units
3070
Overhead cost per unit. (Total overhead allocated / Number of units)
352.41
Model 145
Model 212
Material and labor cost per unit
250
160
Overhead cost per unit
308.15
352.41
Total cost per unit
558.15
512.41
Model 145
Model 212
Market price per unit
1925
310
Less: cost per unit
558.15
512.41
Profit (Loss) per unit
$ 1,366.85
$ (202.41)
Department
Components
Finishing
Support
Allocated based on
Machine hours
Welding hours
Purchase orders
Departmental overhead cost
1013000
474500
241500
Applicable factor in numbers
7730
4600
531
Departmental overhead rate (departmental overhead cost / applicable factor in numbers)
131.05
103.15
454.80
Model 145
Activity driver
Departmental overhead rate
Total overhead cost
Components
2450
131.05
321072.50
Finishing
1600
103.15
165040.00
Support
354
454.80
160999.20
Total overhead allocated
647111.70
Number of units
2100
Overhead cost per unit. (Total overhead allocated / Number of units)
308.15
Model 212
Activity driver
Departmental overhead rate
Total overhead cost
Components
5280
131.05
691944.00
Finishing
3000
103.15
309450.00
Support
177
454.80
80499.60
Total overhead allocated
1081893.60
Number of units
3070
Overhead cost per unit. (Total overhead allocated / Number of units)
352.41
Model 145
Model 212
Material and labor cost per unit
250
160
Overhead cost per unit
308.15
352.41
Total cost per unit
558.15
512.41
Model 145
Model 212
Market price per unit
1925
310
Less: cost per unit
558.15
512.41
Profit (Loss) per unit
$ 1,366.85
$ (202.41)
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