Car Plant (CP) designs and produces automotive parts. In 2017, actual manufacturing overhead is $280,000 CP'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 CP's controller Dixon Johnson 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 record yield the following detailed information in the chart.

0 Data Table each ble cos Department Cost Driver Design CAD-design-hours Engineering Engineering-hours Production Machine-hours Manufacturing Overhead in 2017 $ 35,000 25,000 220,000 Usage of Cost Drivers by Customer Contract Northern Caufield Mystiland Motors Motors Auto 150 250 100 130 100 270 300 3,700 1,000 280,000 Total Print Done 5. department-by-department analysis of manufacturing overhead costs? CP's managers are wondering if they should further refine the department-by-department costing system into an ABC system by lder what conditions i Requirements - 017, actual manufad ng charged noncomg duction, and engine bits three custome ption of overhead wing detailed infor cated to each custon the simple costing m the nearest cent.) 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 CP use the information available from its department-by-department analysis of manufacturing overhead costs? 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? Print Done