Cost Allocation and Performance Evaluation at Fiat Chrysler Automobiles (FCA)

Requirements:

1. Develop a cost allocation method for FCA's production facilities to allocate overhead costs to different vehicle models.

Vehicle Model	Direct Costs per Unit ($)	Overhead Costs ($)
Jeep Wrangler	20,000	5,000,000
Ram 1500	25,000	6,000,000

• Implement an activity-based costing (ABC) system to allocate manufacturing overhead costs to FCA's Jeep and Ram truck models.
• Evaluate the accuracy of cost allocation methods in measuring the profitability of each vehicle model at FCA.
• Recommend cost allocation improvements to enhance decision-making and performance evaluation at FCA.