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 $ 454,000 Number of batches 710
Machining 310,000 Machine hours 8,590
Setups 230,000 Number of setups 180
$ 994,000
Finishing Welding $ 182,000 Welding hours 4,700
Inspecting 233,000 Number of inspections 790
Rework 64,000 Rework orders 170
$ 479,000
Support Purchasing $ 133,000 Purchase orders 483
Providing space 34,500 Number of units 5,150
Providing utilities 63,000 Number of units 5,150
$ 230,500
Additional production information concerning its two product lines follows.
Model 145 Model 212
Units produced 2,100 3,050
Welding hours 1,200 3,500
Batches 355 355
Number of inspections 470 320
Machine hours 3,250 5,340
Setups 90 90
Rework orders 100 70
Purchase orders 322 161
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 $190 for Model 145 and $160 for Model 212.
3. If the market price for Model 145 is $1,025 and the market price for Model 212 is $270, determine the profit or loss per unit for each model
