Using ABC to assess prices Refer to the information in Exercise 4-9 to answer the following requirements.

Required

1. Usin. ABC comtute the overhead cost ter 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 $200 for Model 145 and $180 for Model 212.

3. If the market price for Model 145 is $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. Comment on the results.

Reference Exercise 4-9'

Using the plantwide overhead rate to assess prices Real 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 a plant wide overhead rate based on machine hours, 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 $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. Comment on the results.

Process Activity Components Changeover Machining Setups Finishing Support Welding Inspecting Rework Purchasing Providing space Providing utilities Overhead Cost $ 500,000 279,000 225,000 $1,004,000 $ 180,300 210,000 75,000 $ 465,300 $ 135,000 32,000 65,000 $ 232,000 Driver Number of batches Machine hours Number of setups Welding hours Number of Inspections Rework orders Purchase orders Number of units Number of units Quantity 800 6,000 120 3,000 700 300 450 5,000 5,000 Units produced ..... Welding hours.... Batches Number of Inspections Machine hours.... Setups .... Rework orders Purchase orders Model 145 1,500 800 400 400 1,800 60 160 300 Model 212 3,500 2,200 400 300 4,200 60 140 150