5

Item 4

Item 4 2 points

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		$	596,050		Number of batches	910
	Machining			390,150		Machine hours	8,500
	Setups			339,300		Number of setups	180
			$	1,325,500
Finishing	Welding		$	355,320		Welding hours	6,300
	Inspecting			325,650		Number of inspections	835
	Rework			39,000		Rework orders	150
			$	719,970
Support	Purchasing		$	172,050		Purchase orders	465
	Providing space			31,400		Number of units	8,700
	Providing utilities			128,680		Number of units	8,700
			$	332,130

Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		2,900			5,800
Welding hours		2,600			3,700
Batches		455			455
Number of inspections		495			340
Machine hours		3,150			5,350
Setups		90			90
Rework orders		110			40
Purchase orders		310			155

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 $230 for Model 145 and $113 for Model 212. 3. If the market price for Model 145 is $626.63 and the market price for Model 212 is $325.25, determine the profit or loss per unit for each model.