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 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		$	480,000		Number of batches	770
	Machining			313,000		Machine hours	8,420
	Setups			229,000		Number of setups	80
			$	1,022,000
Finishing	Welding		$	194,000		Welding hours	5,300
	Inspecting			225,000		Number of inspections	815
	Rework			62,000		Rework orders	210
			$	481,000
Support	Purchasing		$	139,000		Purchase orders	531
	Providing space			32,000		Number of units	4,870
	Providing utilities			70,000		Number of units	4,870
			$	241,000

   
Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,800			3,070
Welding hours		1,800			3,500
Batches		385			385
Number of inspections		495			320
Machine hours		3,150			5,270
Setups		40			40
Rework orders		130			80
Purchase orders		354			177

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 $230 for Model 145 and $170 for Model 212.
3. If the market price for Model 145 is $950 and the market price for Model 212 is $290, determine the profit or loss per unit for each model.

Answer 1