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$500,000Number of batches800Machining279,000Machine hours6,000Setups225,000Number of setups120$1,004,000FinishingWelding$180,300Welding hours3,000Inspecting210,000Number of inspections700Rework75,000Rework orders300$465,300SupportPurchasing$135,000Purchase orders450Providing space32,000Number of units5,000Providing utilities65,000Number of units5,000$232,000

Additional production information concerning its two product lines follows.

Model 145Model 212Units produced1,5003,500Welding hours8002,200Batches400400Number of inspections400300Machine hours1,8004,200Setups6060Rework orders160140Purchase orders300150

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 $250 for Model 145 and $180 for Model 212.

3.If the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model.