QUESTION 3 (20 MARKS) The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019, actual variable manufacturing overhead is $280,000. FCA'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 noncompetitive prices, so FCA's controller Matthias Hodge 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: Department Design Production Engineering Total Cost Driver CAD design hours Engineering hours Machine hours Manufacturing Overhead in 2019 $ 35,000 25,000 220.000 $280,000 Usage of Cost of Drivers by Customer Contract Gumbs Connor Richardson Motors Motors Auto 150 250 100 130 100 270 300 3,700 1.000 Required Compute the manufacturing overhead allocated to each customer in 2019 using the simple costing system that uses machine-hours as the allocation base. (1 mark) i. ii. Compute the manufacturing overhead allocated to each customer in 2019 using department-based manufacturing overhead rates. (9 marks) Using your results from requirements 1 and 2 above, which customer do you think was complaining about being overcharged in the simple system? Which customer(s) will be unhappy? How would you respond to these concerns if raised by those customers? (5 marks) Question 3 Mark Key i. ii. Manufacturing overhead allocated to each customer using simple costing system (1 mark) The manufacturing overhead allocated to each customer in 2019 using department- based manufacturing overhead rates. a. Design 1 mark b. Production 1mark c. Engineering 1 mark d. Design related overhead 1 mark e. Production related Overhead 1 mark f. Engineering related Overhead 1 mark g. Engineering related Overhead per customer 3 marks I mark for using correct ratio I mark for discussion about the differences for all customers 3 marks for calculation and/or conceptual discussion that includes identification of customers and response to their concerns