Car PlantCar Plant

(CPCP)

designs and produces automotive parts. In

20172017,

actual manufacturing overhead is

$ 318 comma 000$318,000.

CP'sCP's

simple costing system allocates manufacturing overhead to its three customers based onmachine-hours and prices its contracts based on full costs. One of its customers has regularly complained of being charged noncompetitive prices, so

CP'sCP's

controller

DevonDevon

EverettEverett

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:

$

$

Requirement 1. Compute the manufacturing overhead allocated to each customer in

20172017

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

CPCP's

manufacturing overhead rate for

20172017.

(Round your answer to the nearest cent.)

Total manufacturing overhead		Total machine hours	=	Manufacturing overhead rate
$318,000		5,000	=	$63.60	per machine hour

Calculate the overhead allocated to each customer using the simple costing method. (Round your answers to the nearest whole dollar.)

	Machine	Overhead
Customer	Hours Used	Allocated
United Motors	220	$13,992
Anthony Motors	3,300	$209,880
Herman Auto	1,480	$94,128

Requirement 2. Compute the manufacturing overhead allocated to each customer in

20172017

using department-based manufacturing overhead rates. (Abbreviations used: Dept. = Department.)

Determine the formula used to calculate the department-based manufacturing overhead rates:

Manufacturing overhead per dept.

Total hours per dept.

=

Manufacturing overhead rate by dept.

CPCP's

20172017

manufacturing overhead rates by department are as follows:

	Manufacturing Overhead Rate
Department	(by Department)
Design	$95	per	CAD-design hour
Engineering	$75	per	engineering hour
Production	$50	per	machine hour

Calculate the overhead allocated to each customer, by department, using the departmental manufacturing overhead rates calculated in the previous step. Calculate the total overhead cost for each department and each customer.

	United	Anthony	Herman
Department	Motors	Motors	Auto	Total
Design
Engineering
Production
Total