Question
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
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 Activity Overhead Cost Driver Quantity Components Changeover $ 627,450 Number of batches 890 Machining 372,354 Machine hours 8,130 Setups 112,800 Number of setups 60 $ 1,112,604 Finishing Welding $ 281,120 Welding hours 5,600 Inspecting 301,500 Number of inspections 900 Rework 67,200 Rework orders 240 $ 649,820 Support Purchasing $ 151,125 Purchase orders 465 Providing space 30,900 Number of units 9,000 Providing utilities 140,100 Number of units 9,000 $ 322,125 Additional production information concerning its two product lines follows. Model 145 Model 212 Units produced 3,000 6,000 Welding hours 2,400 3,200 Batches 445 445 Number of inspections 500 400 Machine hours 2,850 5,280 Setups 30 30 Rework orders 160 80 Purchase orders 310 155 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 $240 for Model 145 and $115 for Model 212. 3. If the market price for Model 145 is $570.92 and the market price for Model 212 is $297.54, determine the profit or loss per unit for each model.
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