Compute the overhead cost per unit for each product line

Assignment Help Managerial Accounting

Reference no: EM13662795

Using the plantwide overhead rate to assess prices

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.

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

	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	ISO

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 product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212.

3. If the market price for Model 145 is $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. Comment on the results.

Reference no: EM13662795

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