Using the plantwide Overhead rate to assess prices L.O. A1, P1
| 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 | ||||
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| $ | 1,004,000 | ||||||
| Finishing | Welding | $ | 180,300 | Welding hours | 3,000 | ||
| Inspecting | 210,000 | Number of inspections | 700 | ||||
| Rework | 75,000 | Rework orders | 300 | ||||
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| $ | 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 | ||||
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| $ | 232,000 | ||||||
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| 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 | ||||
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