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 Components Changeover Machining Setups Driver Number of batches Machine hours Number of setups Quantity 830 8,040 140 Finishing Welding Inspecting Rework Overhead Cost $ 468,950 373,860 257,600 $1,100,410 $ 324,500 320,050 53,550 $ 698,100 $ 180,910 31,800 79,800 292,510 Welding hours Number of inspections Rework orders 5,500 865 210 Support Purchasing Providing space Providing utilities Purchase orders Number of units Number of units 458 6,000 6,000 Additional production information concerning its two product lines follows. produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders Model 145 2,000 2,400 415 495 2,750 70 130 305 Model 212 4,000 3,100 415 370 5,290 70 80 153 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 $190 for Model 145 and $113 for Model 212. 3. If the market price for Model 145 is $693.91 and the market price for Model 212 is $384.38, 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 Activity Rate Expected Activity $ 468,950 373,860 257,600 830 Number of batches 8,040 Machine hours 140 Setups Activity Components Changeover Machining Setups Finishing Welding Inspecting Rework Support Purchasing Providing space and utilities $ 324,500 320,050 53,550 5,500 Welding hours 865 Inspections 210 Rework orders $ 180,910 111,600 458 Purchase orders 6,000 Units $ 0 $ 0 Total overhead cost Total units produced Overhead cost 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 $190 for Model 145 and $113 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 $693.91 and the market price for Model 212 is $384.38, 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
