Automotive Products (AP) designs and produces automotive parts. In 2017, actual manufacturing overhead is $280,000. AP's simple costing system allocates 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 AP's controller Doug Smith realizes that it is time to examine the consumption of overhead resources more closely. He knows that there are three main departments that consume overhead resources: design, production, and engineering. Interviews with the department personnel and examination of time records yield the following detailed information: (Click the icon to view the information.) Read the requirements Requirement 1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base. Determine the formula needed to calculate overhead using the simple costing method and then calculate AP's manufacturing overhead rate for 2017. (Round your answer to the nearest cent.) Total manufacturing overhead Total machine hours Manufacturing overhead rate $ 280,000 5.000 = $ 56.00 per machine hour Calculate the overhead allocated to each customer using the simple costing method. (Round your answers to the nearest whole dollar.) Customer State Motors Machine Overhead Hours Used Allocated 300 $ 16,800 3.700 $ 207,200 1,000 $ 56,000 Janek Motors Mystiland Auto Requirement 2. Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates. (Abbreviations used: Dept. = Department.) Determine the formula used to calculate the department-based manufacturing overhead rates: = Manufacturing overhead rate by dept. Requirement 2. Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates Abbrewations used: Dept. - Department Determine the formula used to calculate the department-based manufacturing overhead rates J = Manufacturing pverleadvate by dept Machine hours per dept Manufacturing overhead per customer Manufacturing overhead per dept. Total hours per dept. Total machine hours Total nanufacturing overhead Help me solve this Etext pages Get more help Requirement 2. Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates Abbrowations used Dot Department) Determine the formula used to calculate the department based manufacturing overhead rates! - Manufacturing overhead tate by Machine hours per dept Manufacturing overhead per customer Manufacturing overhead per dept Total hours per dept Total machine hours Total manufacturing overhead Help me solve this Etext pages Get more help - - X Data table Requirements 1. 2. Department Cost Driver Design CAD-design-hours Engineering Engineering-hours Production Machine-hours Usage of Cost Drivers by Customer Contract Manufacturing Janek Mystiland Overhead in 2017 State Motors Motors Auto $ 35,000 150 250 100 25,000 130 100 270 220,000 300 3.700 1,000 $ 280,000 3. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates. 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? How else might AP use the information available from its department-by-department analysis of manufacturing overhead costs? AP'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? Total 4. 5. Print Done Print Done C
