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5 Car parts (CP) designs, manufactures and sells automotive parts. Actual manufacturing overheads costs for 2018 were $308,600. CP's simple costing system allocates manufacturing overhead
5 Car parts (CP) designs, manufactures and sells automotive parts. Actual manufacturing overheads costs for 2018 were $308,600. CP's simple costing system allocates manufacturing overhead to its three customer based on machine hours and price its contract based on full cost.One of its customers has regularly complained of being charged non-competitive prices. So CP's controller Devon Smith realises that it is time to examine the consumption of resources more closely. CP's has three main operating departments: design, engineering and production. Design - the design of parts, using state of the art, computer aided design (CAD) equipment Engineering - The prototyping of parts and testing of their specifications Production - the manufacture of parts Interview with the department personnel and examination of time records yield the following detailed information: Department Cost Driver MOH in 2018 Use of Cost Drivers United Motors Holden Motors Leland Motors Design CAD design-hours $ 39,000 110 200 80 Engineering Engineering-hours 29,600 70 60 240 Production Machine-hours 240,000 120 2,800 1,080 Total $308,600 Required 1. Using the simple costing system, compute the plantwide manufacturing overhead rate for 2018 and manufacturing overhead allocated to each contract in 2018. 2. Compute the MOH rate for 2018 and the MOH allocated to each contract in 2018 using department based MOH rates (using ABC costing)
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