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A) 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	Overhead Cost				Driver	Quantity
Components	Changeover		$	458,000		Number of batches	870
	Machining			313,000		Machine hours	8,320
	Setups			232,000		Number of setups	200
			$	1,003,000
Finishing	Welding		$	188,000		Welding hours	5,900
	Inspecting			233,000		Number of inspections	875
	Rework			61,500		Rework orders	160
			$	482,500
Support	Purchasing		$	135,000		Purchase orders	525
	Providing space			33,000		Number of units	4,820
	Providing utilities			67,000		Number of units	4,820
			$	235,000

Additional production information concerning its two product lines follows.

	Model 145			Model 212
Units produced		1,800			3,020
Welding hours		2,400			3,500
Batches		435			435
Number of inspections		505			370
Machine hours		3,050			5,270
Setups		100			100
Rework orders		110			50
Purchase orders		350			175

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 department. Assign costs to the support department based on number of purchase orders. 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $270 for Model 145 and $210 for Model 212. 3. If the market price for Model 145 is $1,475 and the market price for Model 212 is $320, determine the profit or loss per unit for each model.

B)

Exercise 4-6 Assigning overhead costs using the plantwide rate and departmental rate methods LO P1, P2

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made from components shaped in the fabricating department and assembled in the assembly department. Information related to the 33,000 desk lamps produced annually follows.

Direct materials	$	270,000
Direct labor
Fabricating department (6,000 DLH $28 per DLH)	$	168,000
Assembly department (16,000 DLH $29 per DLH)	$	464,000
Machine hours
Fabricating department		14,700	MH
Assembly department		20,300	MH

Expected overhead cost and related data for the two production departments follow.

	Fabricating			Assembly
Direct labor hours		190,000	DLH		325,000	DLH
Machine hours		169,000	MH		121,000	MH
Overhead cost	$	330,000		$	405,000

Required 1. Determine the plantwide overhead rate for Laval using direct labor hours as a base. 2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate. 3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department. 4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.

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