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Question 7: Cost Drivers and Allocating Overhead Costs You are given the following information for an engineering and manufacturing group: Cost 197 Hourly rate $69.38

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Question 7: Cost Drivers and Allocating Overhead Costs You are given the following information for an engineering and manufacturing group: Cost 197 Hourly rate $69.38 $39.17 Engineer Pipe Fitter Direct Costs Overhead Total cost Hours 7424/1640 157 205640 1974 207280 $113,783.20 $220,918.80 $334,702.00 $197,420.00 $532,122.00 The group has undertaken three projects that have utilized resources according to the following table: B 0 Project Space utilization (sqft) Manufacturing Machine Utilization Engineering direct hours Pipe Fitter direct hours Total Direct hours 100 1140 700 900 100 4640 4740 300 500 400 1000 1140 1 400 Complete the following: 1. Calculate the overhead costs that would be allocated to each project based on: (1) space utilization (2) manufacturing machine utilization (3) total direct hours 2. Calculate the total cost for each project when the overhead is allocated according to: (1) space utilization (2) manufacturing machine utilization (3) total direct hours 3. Comment on how the three (3) different cost drivers that are used affect the overall cost of each project. How might the use of one allocation cost driver over another affect the decision to proceed with a project? How might the use of an incorrect cost driver affect a company's performance and profitability

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