. Automotive Products (AP) designs, manufactures, and sols automotive parts. Actual variable manufacturing overhead costs for 2018 were $312,000. AP'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 non-competitive prices, so AP's controller, Doug Drapor, realizes that it is time to examine the consumption of resources more closely AP has three main operating departments: design, engineering and production Design-the design of parts, using state-of-the-art, computer-aided design (CAD) equipment Engneeringthe prototyping of parts and testing of their specifications Production--the manufacture of parts. Interviews with tho department personnel and examination of time records yold the following detailed information Click the icon to view the cost drivers information) Beque (Round your answer to the noarost cont.) Tolal variable overhead Total machine-hours Variable overhead rate - Simple costing per machine-hour Calculate the overhead allocated to each customer using the simple costing method. (Round your answers to the nearest cent) Northern Caesar Mystiland Motors Motors Motors Total wwwww - Cost drivers information Variable Use of Cost Drivers by Customer Northern Caesar Mystiland Motors Motors Vehicle 202 83 Department Cost Driver MOH in 2018 Design CAD design-hours $ 42,000 Engineering Engineering-hours 30,000 Production Machine-hours 240.000 $ Total 312,000 115 85 78 237 120 2,800 1,080 $ Print Done 1. Using the simple costing system, compute the plantwide variable manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each contract in 2018. 2. Compute the variable manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each contract in 2018 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 AP use the information available from its department-by-department analysis of variable manufacturing overhead costs? 5. 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 variable overhead Total machine-hours Variable overhead rate - Simple costing per machine-hour Calculate the overhead allocated to each customer using the simple costing method (Round your answers to the nearest cent.) Northern Caesar Mystiland Motors Motors Motors Total Variable overhead allocations (simple costing system) Requirement 2. Compute the variablo manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each customer in 2 department-based variable overhead rates. Determine the formula used to calculate the department-based variablo manufacturing overhead rates: Variable overhead rate by department AP's 2018 variable manufacturing overhead rates by department are as follows: Variable Manufacturing Overhead Rato por per Vanablo Manufacturing Overhead Rate Department (by Department) Design por Engineering Production Calculato the overhoad allocated to each customer, by department, using the departmental variable manufacturing overhead rates Calculated in the previous stop Calculato the total overhead cost for each dopartment and each customer Northern Caesar Mystiland Department Motors Motors Motors Total Design Engineering Production Total Automotive Products (AP) designs, manufactures, and sells automotive parts. Actual variable manufacturing overhead costs for 2018 were $312.000. AP's simple Requirement 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? Under the simple costing system, was likely unhappy about its bill because the contract appears to have been it the new department-based rates are used to price contracts will likely be happier about its bal. in the now department-based rates are used to price contracts will likely be unhappy. This is because their bills under the simple couting systom appear to have been Using tho department-based rates, their bills will be if the new department-based rates are used AP should explain to the unhappy customers how the calculation was done and point out their high use of relative to Requirement 4. How else might AP use the information available from its department by department analysis of variable manufacturing overhead costs? Other than for pricing AP can also use the information from the department-based system to its own operations so that there is maximum value from all indirect resources. It might sot targets over time to both the consumption of each indirect resource and the unit costs of the resources. The department-based system gives AP more opportunities for targeted cost management Requirement 5. AP's managers are wondering if they should further refine the department-by-dapartment costing system into an ABC system by identifying . maximum value from all indirect resources. It might set targets over time to both the consumption of each indirect resource and the unit costs of the resources. The department-based system gives AP more opportunities for targeted cost management, Requirement 5. 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? (Round the percentage to the nearest whole percent.) It worthwhile to further refine the costing system into an ABC system if there among contracts in the consumption of activities within a department. If, for example, most activities within the design department were, in fact, driven by CAD design-hours, then the more refined system would be than the department-based cost system. Even if there were sufliciont variation, considering the relative sizes of the three department cost pools, it to further analyze the production cost pool, which consumos % of the manufacturing overhead