Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow.
Process
Activity
Budgeted Cost
Activity Cost Driver
Budgeted
Activity
Usage
Assembly
Machining
\$ 311,600
Machine hours (MH)
7,200
Setups
28,000
Setups
180
Finishing
Inspecting
\$ 339,600
Inspections
800
Support
Purchasing
\$ 132,000
Purchase orders
450
Additional production information concerning its two models follows.
Units and Activities
Units produced
Machine hours
Model X
Model Z
1,400
2,800
2,200
5,000
Setups
60
120
Inspections
500
300
Purchase orders
300
150
Per Unit
Model X
Model Z
Selling price per unit
\$ 400
\$ 380
Direct materials cost per unit
155
115
Direct labor cost per unit
145
125
1. Compute the activity rate for each activity using activity-based costing.
2. Using activity-based costing, compute the overhead cost per unit for each model.
3. Compute the total product cost per unit for each model.
4. For each model, compute the gross profit per unit (selling price per unit minus product cost per unit).
For each model, compute the gross profit per unit (selling price per unit minus product cost per unit).
Note: Round "Product cost per unit" and "Gross Profit" to 2 decimal places and other intermediate calculations to the nearest whole dollar amount. Negative amounts should be indicated with a minus sign.
Per Unit
Model X
Model Z
Selling Price
Product cost per unit
Gross Profit