Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5-19 Plantwide indirect cost rates. [Excel template] (LO 2, 3) Car Parts (CP) designs, manufactures, and sells automotive parts. Actual variable manufacturing overhead costs for

image text in transcribedimage text in transcribed

5-19 Plantwide indirect cost rates. [Excel template] (LO 2, 3) Car Parts (CP) designs, manufactures, and sells automotive parts. Actual variable manufacturing overhead costs for 2022 were $319,800. CP's simple costing system allocates variable manufacturing overhead to its three customers based on machine-hours and prices its contracts based on full costs. One of its customers has regularly complained of being charged noncompetitive prices, so CP's controller, Devon Smith, realizes that it is time to examine the consumption of resources more closely. CP 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 Interviews with the department personnel and examination of time records yield the following detailed information: Department Design Engineering Production Total Cost Driver CAD design-hours Engineering-hours Machine-hours 120 Use of Cost Drivers by Customer United Holden Leland Motors Motors Motors 195 85 75 65 244 125 2,800 1,075 Variable MOH in 2022 $ 41,000 28,800 250,000 $319,800 m Required 1. Using the simple costing system, compute the plantwide variable manufacturing overhead rate for 2022 and the variable manufacturing overhead allocated to each contract in 2022. 2. Compute the variable manufacturing overhead rate for 2022 and the variable manufacturing overhead allocated to each contract in 2022 using department-based variable overhead rates. 3. Comment on your answers in requirements 1 and 2. Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contracts, which customer(s) will be unhappy? How would you respond to these concerns? 4. How else might CP use the information available from its department- by-department analysis of variable manufacturing overhead costs? 5. CP's managers are wondering if they should further refine the department-by-department costing system into an ABC system by identifying different activities within each department. Under what conditions would it not be worthwhile to further refine the department costing system into an ABC system

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Reporting And Analysis, 2017 Update

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

2nd Edition

1337505625, 9781337505628

More Books

Students also viewed these Accounting questions

Question

Detailed note on the contributions of F.W.Taylor

Answered: 1 week ago