Exercise 04-11 Using ABC to assess prices LO P3 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 $ 526,350 Number of batches 870 Machining 354,768 Machine hours 7, 780 Setups 74,200 Number of setups 40 $ 955,318 Finishing Welding $362,880 Welding hours 5,600 Inspecting 237,000 Number of inspections 790 Rework 50, 350 Rework orders 190 $ 650,230 Support Purchasing $ 183,580 Purchase orders 548 Providing space 31,200 Number of units 3,300 Providing utilities 31,170 Number of units 3,300 $ 245,950 Additional production information concerning its two product lines follows. Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders Model 145 1,100 2,000 435 470 2,450 20 140 365 Model 212 2,200 3,600 435 320 5,330 20 50 183 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 $240 for Model 145 and $121 for Model 212. 3. If the market price for Model 145 is $1,024.92 and the market price for Model 212 is $570.90, determine the profit or loss per unit for each model. 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 Activity driver Overhead incurred assigned Model 212 Activity driver Overhead incurred assigned Expected Costs Expected Activity Activity Rate $ 526,350 354,768 74,200 870 Number of batches 7,780 Machine hours 40 Setups Activity Components Changeover Machining Setups Finishing Welding Inspecting Rework Support Purchasing Providing space and utilities S 362,880 237,000 5,600 Welding hours 790 Inspections 190 Rework orders 50,350 S 183,580 62,370 548 Purchase orders 3,300 Units S 0 S 0 Total overhead cost Total units produced Overhead cost per unit Required 1 Required 2 Required 3 Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $240 for Model 145 and $121 for Model 212. (Round your final answers to 2 decimal places.) Model 145 Model 212 Materials and Labor per unit Overhead cost per unit Total cost per unit Required 1 Required 2 Required 3 If the market price for Model 145 is $1,024.92 and the market price for Model 212 is $570.90, determine the profit or loss per unit for each model. (Round your final answers to 2 decimal places.) Model 145 Model 212 Price per unit Cost per unit Profit (loss) per unit
