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Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined
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 Components Activity Changeover Overhead Cost Driver $ 472,000 Number of batches Machining Setups 306,000 Machine hours 225,000 $1,003,000 Number of setups Quantity 710 7,900 180 Finishing Welding $ 190,000 Welding hours 4,300 Inspecting 226,000 Number of inspections 865 Rework 63,000 Rework orders 260 $ 479,000 Support Purchasing Providing space Providing utilities. $ 135,000 37,500 69,000 Purchase orders Number of units Number of units 489 5,030 5,030 $ 241,500 Additional production information concerning its two product lines follows. Units produced Model 145 Model 212 2,000 Welding hours 1,000 3,030 3,300 Batches 355 355 Number of inspections 485 380 Machine hours 2,550 5,350 Setups 90 90 Rework orders 140 120 Purchase orders 326 163 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 $240 for Model 145 and $180 for Model 212. 3. If the market price for Model 145 is $1,400 and the market price for Model 212 is $330, determine the profit or loss per unit for each model.
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