Wheeler Place (WP) designs, manufactures, and sells automotive parts. Actual variable manufacturing overhead costs for 2018 were $312,000. WP'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 non-competitive prices, so WP's controller, Devon Smith, realizes that it is time to examine the consumption of resources more closely. WP has three main operating departments: design, engineering, and production. - Design-the design of parts, using state-of-the-art, computer-aided design (CAD) equipment. - Engineering-the prototyping of parts and testing of their specifications. - Production-the manufacture of parts. Interviews with the department personnel and examination of time records yield the following detailed information. (Click the icon to view the cost drivers information.) Requirement 1. Using the simple costing system, compute the plantwide variable manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each customer in 2018. Determine the formula needed to calculate overhead using the simple costing method and then calculate WP's variable manufacturing overhead rate for 2018 . (Round your answer to the nearest cent.) 1 = Variable overhead rate Simple costing 1 WP's 2018 variable manufacturing overhead rates by department are as follows. department and each customer. Requirement 3 . Comment on your answers in requirements 1 and 2 . Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contracts, which customer(s) will be unhappy? How would you respond to these concerns? Under the simple costing system, was likely unhappy about its bill because the contract appears to have been If the new department-based rates are used to price contracts, will likely be happier about its bill. If the new department-based rates are used to price contracts, will likely be unhappy. This is because their bills under the simple costing system appear to have been Using the department-based rates, their bills will be Cost drivers information Required 1. Using the simple costing system, compute the plantwide variable manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each contract in 2018 . 2. Compute the variable manufacturing overhead rate for 2018 and the variable manufacturing overhead allocated to each contract in 2018 using department-based variable overhead rates. 3. Comment on your answers in requirements 1 and 2 . Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contracts, which customer(s) will be unhappy? How would you respond to these concerns? 4. How else might WP use the information available from its department-by-department analysis of variable manufacturing overhead costs? 5. WP's managers are wondering if they should further refine the department-by-department costing system into an ABC system by identifying different activities within each department. Under what conditions would it not be worthwhile to further refine the department costing system into an ABC system
