Exercise 4-8 Using departmental overhead rates to assess prices LO P2 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. Process Activity Changeover Machining Setups Overhead Cost Driver Number of batches Machine hours Quantity Components 466,000 890 303,000 7,810 Numb of setups 140 S190.000 Finishing Welding Inspecting Rework Welding hours Number of inspections Rework orders 5,200 845 221,000 63,500 180 474,500 135,000 Support Purchasing Purchase orders 519 36,000 Prov ilities 230 240,000 Additional production information concerning its two product lines follows. ETT Model 212 3,030 Model 145 2.200 Units produced hours 1. 3, Batches Number of inspections Machine hours 376 475 2,450 5,360 Revock orders 136 50 Purchase orders 46 173 Required: 1. 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 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $190 for Model 145 and $130 for Model 212. 3. If the market price for Model 145 is $1,175 and the market price for Model 212 $280, determine the profit or loss per unit for each model
