Question
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
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. Process Activity Overhead Cost Driver Quantity Components Changeover $ 471,750 Number of batches 850 Machining 373,503 Machine hours 7,930 Setups 109,500 Number of setups 60 $ 954,753 Finishing Welding $ 356,120 Welding hours 5,800 Inspecting 319,200 Number of inspections 840 Rework 44,800 Rework orders 160 $ 720,120 Support Purchasing $ 201,450 Purchase orders 510 Providing space 32,100 Number of units 6,600 Providing utilities 92,640 Number of units 6,600 $ 326,190 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced 2,200 4,400 Welding hours 2,600 3,200 Batches 425 425 Number of inspections 470 370 Machine hours 2,650 5,280 Setups 30 30 Rework orders 80 80 Purchase orders 340 170 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 $220 for Model 145 and $113 for Model 212. 3. If the market price for Model 145 is $653.34 and the market price for Model 212 is $351.88, determine the profit or loss per unit for each model.
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