Parts World (PW) designs and produces automotive parts. In 2020, actual variable manufacturing overhead is $318,000....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Parts World (PW) designs and produces automotive parts. In 2020, actual variable manufacturing overhead is $318,000. PW'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 PW's controller Duncan Gilbert 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: (Click the icon to view the information.) Read the requirements. Requirement 1. Compute the manufacturing overhead allocated to each customer in 2020 using the simple costing system that uses machine-hours as the allocation base Determine the formula needed to calculate overhead using the simple costing method and then calculate PW's manufacturing overhead rate for 2020. (Round your answer to the nearest cent.) Manufacturing overhead rate per machine hour Data table Department Cost Driver Design CAD-design-hours Engineering Engineering-hours Production Machine-hours Total Manufacturing Overhead in 2020 $ 38,000 $ 30,000 250,000 318,000 Usage of Cost Drivers by Customer Contract Pacific Motors 115 85 220 Holden Motors 202 78 3,300 Jerdon Auto 83 237 1,480 Requirements 1. 2. 3. 4. 5. Compute the manufacturing overhead allocated to each customer in 2020 using the simple costing system that uses machine-hours as the allocation base. Compute the manufacturing overhead allocated to each customer in 2020 using department-based manufacturing overhead rates. 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? How else might PW use the information available from its department-by-department analysis of manufacturing overhead costs? PW'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? Parts World (PW) designs and produces automotive parts. In 2020, actual variable manufacturing overhead is $318,000. PW'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 PW's controller Duncan Gilbert 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: (Click the icon to view the information.) Read the requirements. Requirement 1. Compute the manufacturing overhead allocated to each customer in 2020 using the simple costing system that uses machine-hours as the allocation base Determine the formula needed to calculate overhead using the simple costing method and then calculate PW's manufacturing overhead rate for 2020. (Round your answer to the nearest cent.) Manufacturing overhead rate per machine hour Data table Department Cost Driver Design CAD-design-hours Engineering Engineering-hours Production Machine-hours Total Manufacturing Overhead in 2020 $ 38,000 $ 30,000 250,000 318,000 Usage of Cost Drivers by Customer Contract Pacific Motors 115 85 220 Holden Motors 202 78 3,300 Jerdon Auto 83 237 1,480 Requirements 1. 2. 3. 4. 5. Compute the manufacturing overhead allocated to each customer in 2020 using the simple costing system that uses machine-hours as the allocation base. Compute the manufacturing overhead allocated to each customer in 2020 using department-based manufacturing overhead rates. 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? How else might PW use the information available from its department-by-department analysis of manufacturing overhead costs? PW'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?
Expert Answer:
Answer rating: 100% (QA)
Requirement 1 Compute the manufacturing overhead allocated to each customer in 2020 using the simple costing system that uses machinehours as the allocation base To calculate the manufacturing overhea... View the full answer
Related Book For
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan
Posted Date:
Students also viewed these accounting questions
-
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. APs simple costing...
-
Automotive Products (AP) designs and produces automotive parts. In 2017, the actual variable manufacturing overhead is $ 308,600. AP's simple costing system allocates variable manufacturing overhead...
-
Automotive Products (AP) designs and produces automotive parts. In 2020, actual variable manufacturing overhead is $308,600. APs simple costing system allocates variable manufacturing overhead to its...
-
Did you ever purchase a bag of M&??s candies and wonder about the distribution of colors? Did you know in the beginning they were all brown? Now, peanut M&Ms are 12% brown, 15% yellow, 12% red, 23%...
-
(a) In the reference frame of the muon in Problem 4, how far does the laboratory travel in a typical lifetime of 2 s? (b) What is this distance in the laboratorys frame?
-
What is the maximum amount that a self- employed taxpayer may contribute to a Solo 401(k) plan?
-
Copy your worksheet from Question 6 into another worksheet. Change the increase from 10% to 18%. Protect the worksheet, so that changes cannot be made. Question 6 Open a new spreadsheet. Type...
-
The Pharma Biotech Corporation spent several years working on developing a DHA product that can be used to provide a fatty-acid supplement to a variety of food products. DHA stands for...
-
Cash discounts are not taken on shipping costs. Group of answer choices True FalseThis factor is the difference between the net cost of merchandise and the retail selling price: Group of answer...
-
Asbat Pharmaceuticals (Asbat) is a leading pharmaceutical company that has been in existence for 22 years. Asbat has a calendar year-end and is audited annually. Asbat only operates in the United...
-
QUESTION 5 (20 MARKS) The following is a report of a clinical trial to evaluate the efficiency of maintenance Chemotherapy for acute Leukemia. Patients were randomly allocated to group 1 and II....
-
If $21,200 is invested in a 2-year CD that compounds annually with an APR of 5%, what will the CD be worth when it matures? Round answer to 2 decimal places.
-
During one week, four production employees of Pisgah Properties worked the hours shown below. All these employees receive overtime pay at one and one-half times their regular hourly rate for any...
-
10 s after an electric fan is turned on, it rotates at 300 rev/min. Its average angular acceleration is A. 3/4 rad/s B. C. D. E. 2 rad/s /4 rad/s rad/s /2 rad/s
-
A taxpayer claimed $6,000 in state taxes (from the state boxes on the Forms W-2 they possessed), $5,000 in real estate taxes, and $7,000 in mortgage interest on their Schedule A. They also had $6,000...
-
Dylan operates a sole proprietorship with the following business assets: Cash Accounts receivable Inventories Equipment Goodwill Tax Amount $ 10.000 $ 18,000 $ 35,000 $ 22,000 Nil Fair Market Value $...
-
Closing gap between college and career. Briefly outline the main ideas of each example, and evaluate the information based on the type of format and its place in the information cycle.
-
Distinguish among total-moisture content, free-moisture content, equilibrium-moisture content, unbound moisture, and bound moisture.
-
The Aqua Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at...
-
How does the management accountant use the payoff matrix to make decisions using data science models?
-
What is a one-time-only special order?
-
How many structural isomers are there for hydrocarbons that have the molecular formula C 4 H 10 ? (a) none (b) one (c) two (d) three
-
Which contains more hydrogen atomsa five-carbon saturated hydrocarbon molecule or a five-carbon unsaturated hydrocarbon molecule? (a) The unsaturated hydrocarbon has more hydrogen atoms. (b) The...
-
Explain why caprylic acid, CH 3 (CH 2 ) 6 COOH, dissolves in a 5, aqueous solution of sodium hydroxide but caprylaldehyde, CH 3 (CH 2 ) 6 CHO, does not dissolve. (a) With two oxygens, the caprylic...
Study smarter with the SolutionInn App