Way Cool produces two different models of air conditioners. The company produces
ID: 2538056 • 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. Activity Overhead Cost Process Components Changeover Driver 890 8,080 200 5 609,850 Number of batches Machining Setups 331,238 365,000 Machine hours Number of setups 51,355,888 Finishing Inspecting Welding 5,400 850 270 5 300,240 Welding hours 310,250 Number of inspections Rework 78,300 Rework orders 5 688.790 SupportPurchasing Providing space Providing utilities 5 188,6805 Purchsse orders 30.900 Number of units 125.430 Number of units 563 8,100 8,100 5 344.935 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 5.400 4.000 445 1.400 445 490 2,750 100 150 375 5,310 100 120 188Explanation / Answer
Answer
A
B
C=A/B
MODEL 145
MODEL 212
Activity
Expected Costs $
Expected activity
Activity Rate
$
Activity Driver incurred
Overhead assigned $
Activity Driver incurred
Overhead assigned $
Components:
Changeover
609650
890
batches
685
per batch
445
304825
445
304825
Machining
381238
8060
machine hours
47.3
per machine hours
2750
130075
5310
251163
Setups
365000
200
setups
1825
per setup
100
182500
100
182500
Finishing:
Welding
300240
5400
welding hours
55.6
per welding hours
1400
77840
4000
222400
Inspecting
310250
850
inspections
365
per inspection
490
178850
360
131400
Rework
78300
270
rework orders
290
per rework order
150
43500
120
34800
Support:
Purchasing
188605
563
purchase orders
335
per purchase order
375
125625
188
62980
Providing space & Utils
156330
8100
units
19.3
per unit
2700
52110
5400
104220
Total Overhead assigned
$1095325
$1294288
Total Units produced
2700
5400
Overhead cost per unit
$405.68
$239.68
Model 145
Model 212
Material and labor Cost
230
121
Overhead per unit
405.68
239.68
Total cost per unit
$635.68
$360.68
Model 145
Model 212
Price per unit
636.2
361.04
Cost per unit
635.68
360.68
Profit (Loss) per unit
$0.52
$0.36
A
B
C=A/B
MODEL 145
MODEL 212
Activity
Expected Costs $
Expected activity
Activity Rate
$
Activity Driver incurred
Overhead assigned $
Activity Driver incurred
Overhead assigned $
Components:
Changeover
609650
890
batches
685
per batch
445
304825
445
304825
Machining
381238
8060
machine hours
47.3
per machine hours
2750
130075
5310
251163
Setups
365000
200
setups
1825
per setup
100
182500
100
182500
Finishing:
Welding
300240
5400
welding hours
55.6
per welding hours
1400
77840
4000
222400
Inspecting
310250
850
inspections
365
per inspection
490
178850
360
131400
Rework
78300
270
rework orders
290
per rework order
150
43500
120
34800
Support:
Purchasing
188605
563
purchase orders
335
per purchase order
375
125625
188
62980
Providing space & Utils
156330
8100
units
19.3
per unit
2700
52110
5400
104220
Total Overhead assigned
$1095325
$1294288
Total Units produced
2700
5400
Overhead cost per unit
$405.68
$239.68
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