Question
4. 2. Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are
4. 2. Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its 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. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.) Process Activity Overhead Cost Driver Quantity Components Changeover $ 452,500 Number of batches 910 Machining 301,000 Machine hours 7,600 Setups 229,500 Number of setups 200 $ 983,000 Finishing Welding $ 180,400 Welding hours 3,500 Inspecting 222,000 Number of inspections 830 Rework 61,300 Rework orders 230 $ 463,700 Support Purchasing $ 137,500 Purchase orders 503 Providing space 31,900 Number of units 5,400 Providing utilities 60,440 Number of units 5,400 $ 229,840 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced 1,800 3,600 Welding hours 1,400 2,100 Batches 455 455 Number of inspections 490 340 Machine hours 2,300 5,300 Setups 100 100 Rework orders 140 90 Purchase orders 335 168
Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its 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 | Quantity | ||||
Components | Changeover | $ | 474,000 | Number of batches | 790 | |||
Machining | 310,000 | Machine hours | 7,830 | |||||
Setups | 227,000 | Number of setups | 60 | |||||
$ | 1,011,000 | |||||||
Finishing | Welding | $ | 192,000 | Welding hours | 4,600 | |||
Inspecting | 224,000 | Number of inspections | 840 | |||||
Rework | 61,000 | Rework orders | 190 | |||||
$ | 477,000 | |||||||
Support | Purchasing | $ | 145,000 | Purchase orders | 525 | |||
Providing space | 35,500 | Number of units | 4,410 | |||||
Providing utilities | 64,000 | Number of units | 4,410 | |||||
$ | 244,500 | |||||||
Additional production information concerning its two product lines follows.
Model 145 | Model 212 | |||||
Units produced | 1,400 | 3,010 | ||||
Welding hours | 1,000 | 3,600 | ||||
Batches | 395 | 395 | ||||
Number of inspections | 490 | 350 | ||||
Machine hours | 2,550 | 5,280 | ||||
Setups | 30 | 30 | ||||
Rework orders | 70 | 120 | ||||
Purchase orders | 350 | 175 | ||||
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 $290 for Model 145 and $170 for Model 212. 3. If the market price for Model 145 is $1,700 and the market price for Model 212 is $300, determine the profit or loss per unit for each model.
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