Way Cool produces two different models of air conditioners. The company produces 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	$ 500,000	Number of batches	800
	Machining	279,000	Machine hours	6,000
	Setups	225,000	Number of setups	120
		$1,004,000
Finishing	Welding	$ 180,300	Welding hours	3,000
	Inspecting	210,000	Number of inspections	700
	Rework	75,000	Rework orders	300
		$ 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
		$ 232,000

Additional production information concerning its two product lines follows.

	Model 145	Model 212
Units produced	1,500	3,500
Welding hours	800	2,200
Batches	400	400
Number of inspections	400	300
Machine hours	1,800	4,200
Setups	60	60
Rework orders	160	140
Purchase orders	300	150

a. 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 the number of purchase orders.

b. Determine 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.

c. Assume if the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model.

Answer rating: 100% (QA)

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