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.
ProcessActivityOverhead CostDriverQuantityComponentsChangeover$483,750Number of batches750Machining396,738Machine hours8,370Setups220,200Number of setups120$1,100,688FinishingWelding$303,600Welding hours4,600Inspecting297,850Number of inspections805Rework50,150Rework orders170$651,600SupportPurchasing$178,565Purchase orders503Providing space31,800Number of units6,900Providing utilities100,680Number of units6,900$311,045
Additional production information concerning its two product lines follows.
Model 145Model 212Units produced2,3004,600Welding hours1,4003,200Batches375375Number of inspections485320Machine hours3,0505,320Setups6060Rework orders12050Purchase orders335168
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 $200 for Model 145 and $119 for Model 212.
3.If the market price for Model 145 is $621.06 and the market price for Model 212 is $357.68, determine the profit or loss per unit for each model.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started