Plant-wide, department, and ABC indirect cost rates. Automotive Products (AP) designs and produces automotive parts. In 2014, actual variable manufacturing overhead is $308,600. 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 it customers has regularly complained of being charged noncompetitive prices, so AP's controller Devon 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.

Usage of Cost Drivers by Customer Contract

							Usage of Cost Drivers by Customer Contract
					Manufacturing		United	Holden	Leland
Department		Cost Driver			Overhead in 2014		Motors	Motors	Auto
Design		CAD-design-hours			$ 39,000		110	200	80
Production		Engineering-hours			$ 29,600		70	60	240
Engineering		Machine-hours			240,000		120	2,800	1,080
Total					308,600

			Round answers to two decimal points.
Enter amount			Compute the manufacturing overhead allocated to each customer in 2014:
______________		1)	a) using the simple costing system that uses machine-hours as the allocation base.
		2)	b) using department-based manufacturing overhead rates:
______________			I)	Design
______________			ii)	Production
______________			iii)	Engineering
______________		3)	Which customer do you think was complaining about being overcharged in the simple system?
			A) United Motors
			B) Holden Motors
			C) Leland Auto