Exercise 04-8 Using the plantwide overhead rate to asses prices LO P1

Way Cool produces two different models of air conditioners. The company produces 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	$451,500	Number of batches	790
	Machining	$301,800	Machine hours	7,610
	Setups	$227,500	Number of setups	40
		$980800
Finishing	Welding	$180,200	Welding hours	6,000
	Inspecting	$233,000	Number of inspections	760
	Rework	$61,000	Rework orders	270
		$474,200
Support	Purchasing	$137,000	Purchase orders	525
	Providing space	$31,650	Number of units	6,600
	Providing utilities	$60,810	Number of units	6,600
		$229,460

Additional production information concerning its two product lines follows.

	Model 145	Model 212
Units produced	2,200	4,400
Welding hours	2,400	3,600
Batches	395	395
Number of inspections	490	270
Machine hours	2,310	5,300
Setups	20	20
Rework orders	160	110
Purchase order	350	175

Required

1. Using a plantwide overhead rate based on machine-hours, compute the overhead costs per unit for each product line.
Overhead costs
Machine hours
2. Determine the total cost per unit for each product line if direct labor and direct materials costs per unit are $300 for Model 145 and $200 for Model 212.
Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Unit Produced	OH Cost per unit
Model 145
Model 212
	Model 145	Model 212
0
3. If the market price for Model 145 is $740 and the market price for Model 212 is $450, determine the profit or loss per unit for each model.
Market price	Model 145	Model 212