Answer:
Way Cool
1. Using ABC, the overhead cost per unit for each product line:
Model 145 Model 212
Overhead cost per unit $496.19 $245.72
2. 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:
Model 145 Model 212
Total cost per unit $746.19 $425.72
3. If the market price for Model 145 is $820 and the market price for Model 212 is $480, the profit or loss per unit for each model:
Model 145 Model 212
Profit per unit $73.81 $54.28
Step-by-step explanation:
a) Data and Calculations:
Process Activity Overhead Cost Driver Quantity
Components Changeover $ 500,000 Number of batches 800
Machining 279,000 Machine hours 6,000
Setups 225,000 Number of setups 120
Total $ 1,004,000
Finishing
Welding $ 180,300 Welding hours 3,000
Inspecting 210,000 Number of inspections 700
Rework 75,000 Rework orders 300
Total $ 465,300
Support
Purchasing $ 135,000 Purchase orders 450
Providing space 32,000 Number of units 5,000
Providing utilities 65,000 Number of units 5,000
Total $ 232,000
Additional production information concerning its two product lines follows:
Model 145 Model 212 Total
Units produced 1,500 3,500 5,000
Welding hours 800 2,200 3,000
Batches 400 400 800
Number of inspections 400 300 700
Machine hours 1,800 4,200 6,000
Setups 60 60 120
Rework orders 160 140 300
Purchase orders 300 150 450
Overhead Rates per Activity Pool:
Components Changeover $ 500,000/800 = $625
Machining 279,000/6,000 = $46.50
Setups 225,000/120 = $1,875
Total $ 1,004,000
Finishing
Welding $ 180,300/3,000 = $60.10
Inspecting 210,000/700 = $300
Rework 75,000/300 = $250
Total $ 465,300
Support
Purchasing $ 135,000/450 = $300
Providing space 32,000/5,000 = $6.40
Providing utilities 65,000/5,000 = $13
Total $ 232,000
Total overheads = $
Model 145 Model 212
Units produced 1,500 3,500
Welding hours $48,080 (800*$60.10) $132,220 (2,200*$60.10)
Batches 250,000 (400*$625) 250,000 (400*$625)
Number of inspections 120,000 (400*$300) 90,000 (300*$300)
Machine hours 83,700 (1,800*$46.50) 195,300 (4,200*$46.50)
Setups 112,500 (60*$1,875) 112,500 (60*$1,875)
Rework orders 40,000 (160*$250) 35,000 (140*$250)
Purchase orders 90,000 (300*$300) 45,000 (150*$300)
Total overhead costs $744,280 $860,020
Units produced 1,500 3,500
Overhead cost per unit $496.19 $245.72
Total production costs:
Model 145 Model 212
Direct costs per unit $250 $180
Total direct costs $375,000 $630,000
Total overhead costs $744,280 $860,020
Total production costs $1,119,280 $1,490,020
Units produced 1,500 3,500
Total cost per unit $746.19 $425.72
Model 145 Model 212
Market price per unit $820.00 $480.00
Total cost per unit 746.19 $425.72
Profit per unit $73.81 $54.28