Question

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. (Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.)

Process Activity Overhead Cost Driver Quantity
Components Changeover $ 459,500 Number of batches 810
Machining 301,600 Machine hours 7,680
Setups 227,500 Number of setups 80
$ 988,600
Finishing Welding $ 180,500 Welding hours 4,900
Inspecting 222,000 Number of inspections 815
Rework 60,700 Rework orders 230
$ 463,200
Support Purchasing $ 135,500 Purchase orders 525
Providing space 31,550 Number of units 4,800
Providing utilities 60,110 Number of units 4,800
$ 227,160
Additional production information concerning its two product lines follows.
Model 145 Model 212
Units produced 1,600 3,200
Welding hours 2,000 2,900
Batches 405 405
Number of inspections 485 330
Machine hours 2,280 5,400
Setups 40 40
Rework orders 130 100
Purchase orders 350 175
Required:
1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line.
2. Determine the total cost per unit for each products line if the direct labor and direct materials costs per unit are $200 for Model 145 and $130 for Model 212.

Answer 1

To find the overhead cost per unit, we calculated the plantwide overhead rate and applied it to each product's machine hours. Model 145's overhead cost per unit is $269.22, and Model 212's overhead cost per unit is $318.80. Including direct materials and labor, the total cost per unit is $469.22 for Model 145 and $448.80 for Model 212.

Step-by-step explanation:

To calculate the plantwide overhead rate based on machine hours, we first need to determine the total overhead cost and the total machine hours. Combining the overhead costs from the components and finishing departments, we have $988,600 + $463,200, which equals $1,451,800. Then, we find that the total machine hours are 7,680. Therefore, the plantwide overhead rate is $1,451,800 / 7,680 machine hours = $188.92 per machine hour.

The overhead cost per unit for each product using this rate is:

• Model 145: 2,280 machine hours * $188.92 = $430,755.60. Divided by 1,600 units produced, the overhead cost per unit is $269.22.
• Model 212: 5,400 machine hours * $188.92 = $1,020,168. Divided by 3,200 units produced, the overhead cost per unit is $318.80.

Now, to determine the total cost per unit for each product line, we add the direct labor and materials to the overhead cost per unit:

• Model 145: $200 (direct materials and labor) + $269.22 (overhead) = $469.22 total cost per unit.
• Model 212: $130 (direct materials and labor) + $318.80 (overhead) = $448.80 total cost per unit.

Answer 2

Plantwide Overhead Rate $ 213.61 per hour

1) Overhead Cost Model 145=$ 487062.56

1) Overhead Cost Model 211= $ 1153494

Total Cost per unit Model 145 696.29 Model 212 $406.56

Step-by-step explanation:

Plantwide Overhead Rate = Total Estimated Overhead/ No of Machine Hours

Process Activity Overhead Cost Driver Quantity

Components Changeover $ 459,500 Number of batches 810

$ 459,500/810= $567.28 per batch

Machining 301,600 Machine hours 7,680

301,600/ 7,680 = $ 39.27

Setups 227,500 Number of setups 80

227,500 /80=2843.75 per set up

$ 459,500 +301,600 +227,500 =$ 988,600

Finishing Welding $ 180,500 Welding hours 4,900

$ 180,500/ 4,900= $ 36.84 per welding hour

Inspecting 222,000 Number of inspections 815

222,000/815 = $ 272.39 per number of inspections

Rework 60,700 Rework orders 230

60,700 /230 = 263.91 per rework order

$ 180,500+ 222,000+ 60,700 =$ 463,200

Support Purchasing $ 135,500 Purchase orders 525

$ 135,500 / 525 = $ 258.10 per purchase order

Providing space 31,550 Number of units 4,800

31,550/4800= $ 6.57 per number of unit

Providing utilities 60,110 Number of units 4,800

60,110 / 4800= $ 12.53

$ 135,500+ 31,550+60,110 =$ 227,160

Additional production information concerning its two product lines follows.

Model 145 Model 212

Units produced 1,600 3,200

Welding hours 2,000 2,900

Batches 405 405

Number of inspections 485 330

Machine hours 2,280 5,400

Setups 40 40

Rework orders 130 100

Purchase orders 350 175

1)Plantwide Overhead Rate = Total Estimated Overhead/ No of Machine Hours

Adding the Estimated Sub Totals we get

Total Estimated Overhead=$ 988,600 + $ 463,200 + $ 227,160

Total Estimated Overhead= $ 1678960

No of Machine Hours= 7860 (given)

Plantwide Overhead Rate =$ 1678960/7860= 213.608= $ 213.61 per hour

Overhead Cost Model 145=$ 213.61 per hour* 2,280 hours

1) Overhead Cost Model 145=$ 487062.56

1) Overhead Cost Model 211=$ 213.61 per hour* 5400 hours= $ 1153494

2) Model 145 Model 212.

Direct Materials $ 130

Direct Labor $200

Overhead Costs $567.28* 405 $567.28*405

= 229784.4 = 229784.4

$ 39.27*2280 $ 39.27*5400

= 89535.6 =212058

2843.75*40 2843.75* 40

=113750 =113750

Subtotal 433070 555592.4

$ 36.84*2000 $ 36.84 *2900

=73680 i = 106836

$ 272.39* 485 $ 272.39* 330

=132109.5 ii = 89888.7

263.91*130 263.91 *100

=34308.3 iii =26391

Subtotal i+ii+iii= 240097.8 223115.7

$ 258.10*350 $ 258.10*175

=90335 i = 45167.5 a

$ 6.57 *1600 $ 6.57 *3200

= 10512 ii =21024 b

$ 12.53 *1600 $ 12.53 *3200

=20048 iii 40096 c

Subtotal i+ii+iii= 120895 a+b+c = 106287.5

Total Overhead 794062.8 884995.6

No of Units 1600 3200

Total Overhead Cost Per Unit 496.29 276.56

Direct Labor $200

Direct Materials $130

Total Cost per unit 696.29 $406.56