Exercise 4-8 Using departmental overhead rates to assess prices LO P2 Way Cool produces two different models of air conditioners. The company produces the mechanical systems in their 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. Activity Components Changeover Machining Setups Overhead Cost Driver Quantity Process Number of batches 470,000 310,000 770 Machine hours 8,400 Number of setups 228,000 80 $1,008,000 Welding Inspecting Welding hours Number of inspections Finishing 188,000 229,000 62,500 6,700 825 Rework Rework orders 220 479,500 Purchasing Providing space Providing utilities Purchase orders Support 135,000 34,500 65,000 537 Number of units 4,720 Number of units 4,720 234,500 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced Welding hours Batches 1,600 2,600 3,120 4,100 385 385 Number of inspections Machine hours 455 370 3,050 5,350 40 Setups Rework orders 40 170 50 Purchase orders 358 179 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 $27O for Model 145 and $120 for Model 212 3. If the market price for Model 145 is $2,150 and the market price for Model 212 is $330, determine the profit or loss per unit for each model. Required 1 Required 2 Required 3 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. (Round your intermediate calculations and per unit cost answers to 2 decimal places.) Show less Components department Overhead costs Machine hours Finishing department Support department Departmental OH Rate Activity Driver Model 145 Total Overhead Cost Components Finishing Support Activity Driver Departmental OH Rate Model 212 Total Overhead Cost Components Finishing Support Required 1 Required 2 Complete this question by entering your answers in the tabs below. Required 3 Required 1 Required 2 Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $270 for Model 145 and $120 for Model 212. (Round your intermediate calculations and cost per unit answe rs to 2 decimal places.) Model 145 Model 212 Materials and Labor per unit Overhead cost per unit Total cost per unit Required 3 Required 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 If the market price for Model 145 is $2,150 and the market price for Model 212 is $330, determine the profit or loss per unit for each model. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Model 145 Model 212 Market price per unit Cost per unit Profit (loss) per unit Required 2 Required 3
