Real Cool produces two different models of air conditioners. The company produces the mechanical...
Question:
Real 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 OH rate and cost per unit answers to 2 decimal places.)
| Process | Activity | Overhead Cost | Driver | Quantity |
|---|---|---|---|---|
| Compnents | Changeover | $452,000 | Number of batches | 750 |
| Machining | 300,200 | Machine hours | 7,640 | |
| Setups | 229,000 | Number of setups | 40 | |
| $981,200 | ||||
| Finishing | Welding | $180,100 | Welding hours | 3,600 |
| Inspecting | 231,000 | Number of inspextions | 850 | |
| Rework | 81,250 | Rework orders | 210 | |
| $472,350 | ||||
| Support | Purchasing | $136,500 | PUrchase orders | 480 |
| Providing space | 30,300 | Number of units | 4,500 | |
| Providing utilities | 50,910 | Number of units | 4,500 | |
| $227,710 |
Additional production information concerning its two product lines follows.
| Model 145 | Model 212 | |
|---|---|---|
| Units produced | 1,500 | 3,000 |
| Welding hours | 1,400 | 2,200 |
| Batches | 375 | 375 |
| Number of inspections | 610 | 340 |
| Machine hours | 2,290 | 6,350 |
| Setups | 20 | 20 |
| Rework orders | 80 | 130 |
| Purchase orders | 320 | 160 |
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 $220 for Model 145 and $150 for Model 212.
3. Assume if the market price for Model 145 is $755 and the market price for Model 212 is $590, determine the profit or loss per unit for each model.
Manufacturing - Traditional Costing:
In traditional costing, the manufacturing overhead costs are allocated to the products manufactured using a plant-wide, predetermined overhead rate. This rate is based on the estimated overhead cost and estimated overhead driver units.
Answer and Explanation: 1
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1.
| Estimated overhead cost | $1,681,260 |
| Estimated machine hours | 7,640 |
| Plantiwde overhead rate | $220.06 per machine hour |
|---|
| Model 145 | Model 212 | |
|---|---|---|
| Machine... |
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Comparing Traditional Costing & Activity-Based Costing
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Chapter 7 / Lesson 6
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Traditional and activity-based costing methods have similarities and differences based on the production methods of a company. Learn about the costs in production and see the comparisons between traditional and activity-based costing systems.
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