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.

   
Additional production information concerning its two product lines follows.

Required:
1. Using ABC, compute the overhead cost per unit for each product line.
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 $180 for Model 212.
3. If the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model.

Process Activity Overhead Cost Driver Quantity Components Changeover $ 500,000 Number of batches 800 Machining 279,000 Machine hours 6,000 Setups 225,000 Number of setups 120 $ 1,004,000 Finishing Welding $ 180,300 Welding hours 3,000 Inspecting 210,000 Number of inspections 700 Rework 75,000 Rework orders 300 $ 465,300 Support Purchasing $ 135,000 Purchase orders 450 Providing space 32,000 Number of units 5,000 Providing utilities 65,000 Number of units 5,000 $ 232,000 Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimal places.) Model 145 Model 212 Activity Expected Costs Expected Activity Activity driver Overheadity diver Overhead Activity Rate 625.00 per batch S 1.875.00 per setup incu 800 Number of batchesS 6,000 Machine hours $ Changeover Machining Setups 500,000 279,000 225,000 400 S 250,000 83,700 112,500 400 250,000 4.200 1,800 120 Setups 60 60 112.500 Finishing Welding 2.200 $ 180,300 210,000 75,000 800 400 160 3,000 Welding hours S 300.00 per inspection 700 Inspections 300 Rework orders 120,000 300S 90,000 Rework 250.00 per rework order 40,000 140 35.000 Support $ 135,000 97,000 Purchasing 450 Purchase orders 300.00 per purchase order 300 90,000 150 45,000 Providing space and utilities 5,000 Units Total overhead cost Total units produced Overhead cost per unit 1,500 515.59 3,500 265.12

Explanation / Answer

1.

2.Total Cost per unit:

3. Profit/(loss) per unit:

Activity Expected costs Expected Activity Activity Rate Model 145 Model 145 Activity Driver incurred Overhead assigned Activity Driver incurred Overhead assigned Components Chaneover               5,00,000             800 Number of batches       625.00 per batch                       400          2,50,000                        400         2,50,000 Matching               2,79,000          6,000 Machine hours          46.50 per machine hour                   1,800             83,700                    4,200         1,95,300 Setups               2,25,000             120 Number of setups    1,875.00 per setup                         60          1,12,500                          60         1,12,500 Finishing Welding               1,80,300          3,000 Welding hours          60.10 per welding hour                       800             48,080                    2,200         1,32,220 Inspection               2,10,000             700 Number of inspections       300.00 per inspection                       400          1,20,000                        300             90,000 Rework                  75,000             300 Rework orders       250.00 per rework order                       160             40,000                        140             35,000 Support Purchasing               1,35,000             450 Purchase orders       300.00 per purchase order                       300             90,000                        140             42,000 Providing space & utilities                  68,200          5,000 Number of units          13.64 per unit                   1,500             20,460                    3,500             47,740 Total Overhead Cost          7,64,740         9,04,760 Total Units Produced                1,500               3,500 Overhead Cost per unit             509.83             258.50

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